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Australian Consumer Credit: Forecasts and Future Opportunities

  • Executive Summary
    • The Australian personal loan market is entering a period of slower growth
    • Key findings
    • Critical success factors
  • Overview to 2016
    • Personal lending balances decreased in 2016
      • 2016 gross advances started to grow again after two years of decline
      • Balances outstanding marginally contracted in 2016 by 1.3% year-on-year
      • Economic growth has continued, but capacity and willingness to take on more debt will be constrained
        • Table Figure 1: Australian consumers' historic restraint has caused balances outstanding to fall despite a recovery in newlending
      • Product preferences have seen little change in recent years
      • Fixed-rate loans remain most attractive to Australian consumers
        • Table Figure 2: Few Australians opt for the uncertainty of variable rate products
      • Australian consumers are more price-sensitive on car loans
        • Table Figure 3: Partnering with car dealers will require fast approval and competitive rates
    • Macroeconomic disparities across Australia's states have led to debt concentration increasing
      • The rebound in the share of lending on the Eastern Seaboard has not come from dramatically higher volume
        • Table Gross advances per state (A$000m), 2010–16
  • Outlook for 2017 and beyond
    • Total fixed and revolving credit loans will reach A$156.6bn by 2020
      • Market growth will resume but will only see modest gains
      • 2017 will be the start of a slow turnaround for gross advances
        • Table Figure 4: Total fixed and revolving credit lending will reach A$156.6bn by 2020
    • Demand for credit will slowly increase
      • Macroeconomic conditions will help to maintain consumer demand at current levels
      • Lenders need to be aware of the geographic concentration of their assets, as household debt-to-income reaches a new high
        • Table Figure 5: Future rate cuts unlikely, raising potential problems for debt servicing in Australia
      • Consumer confidence is recovering, albeit with some hesitancy, suggesting consumers may be unsure of their ability to take on new debt
        • Table Figure 6: Consumer confidence has been volatile, indicating a degree of hesitancy
      • Retail sales are showing signs of growth, supporting uneven lending growth
        • Table Figure 7: All retail sectors experienced moderate-to-strong growth in 2015
    • Traditional lenders risk further loss in market share as new competitors take advantage of shifts in consumer behavior
      • Australian consumers are becoming more comfortable using non-ADIs for financing
      • Providers need to maximize their cross-selling opportunities
      • Consumers have become more comfortable with non-traditional lenders
        • Table Figure 8: Non-ADIs are starting to grow their market share quickly
        • Table Gross advances (A$000m), January 2010–October 2016
        • Table Figure 9: Specialist finance companies in the `Other' category are the fastest-growing among non-ADIs
      • Internet research has become a standard research channel, with consumers comparing reputation and rates
    • Lending across the subsectors of consumer credit will vary significantly
      • The new and used car finance market will be the strongest-performing sector
        • Table Figure 10: Balances outstanding across seven consumer credit categories
        • Table Australian personal lending balances outstanding (A$bn), 2015–20f
      • Gross advances for new and used cards will almost match credit cards and unsecured line of credit lending by 2020
        • Table Figure 11: Debt consolidation and refinancing will grow once again over the forecast period
        • Table Australian personal lending gross advances (A$bn), 2015–20f
      • Increased credit card lending will require winning clients off rivals
        • Table Figure 12: Credit card balances outstanding are forecasted to reach A$58.1bn by 2020
      • Demand for debt consolidation and refinancing products will rebound but then gradually decrease over the forecast period
        • Table Figure 13: Demand for debt consolidation refinancing will recover over the forecast period
      • Demand for new and used car finance will outperform all other sectors
        • Table Figure 14: Gross advances for new and used cars will match credit card lending by 2020
      • The travel and healthcare lending categories will grow moderately in response to an improving economic outlook
        • Table Figure 15: Balances outstanding for `Travel and Other' lending are forecast to reach A$10.7bn by 2020
      • Credit for land and housing construction will enjoy strong growth
        • Table Figure 16: Land and housing construction balances outstanding will reach A$12.7.6bn by 2020
      • Financing for household goods will experience strong growth over the forecast period
        • Table Figure 17: Spending on household goods will rise in line with the improved economic outlook
  • Innovation will nurture new sources of credit
  • Appendix
    • Abbreviations and acronyms
      • Table Gross advances and balances outstanding (A$bn), 2007–16
    • Definitions
      • Gross advances
      • Balances outstanding
      • Line of credit
    • Methodology
    • Bibliography
    • Further reading

Australian Consumer Credit: Forecasts and Future Opportunities

Summary

GlobalData’s “Australian Consumer Credit: Forecasts and Future Opportunities” report analyzes the Australian consumer credit market, with coverage of both supply and demand factors as well as sectoral analysis.

Consumer reservations about debt levels and repayment will relax as the economy continues to grow and unemployment falls. However, consumers will be cautious about taking on new debt, with consumer credit gross advances growing by a modest CAGR of 2.7% between 2017-20. Outstanding balances and gross advances have yet to reach pre-crisis levels. We now expect total fixed and revolving credit loans to reach A$156.6bn by 2020, with a CAGR of 2% over the forecast period. Australia’s mining states experienced a rough patch late in 2014, as the mining sector suffered due to the commodities bust. The end of the mining investment boom locally also led to a significant disparity in growth between Australian states. Although in its infancy, the new US administration has had a positive impact on major commodity prices, along with continued demand from East Asia. If sustained this will benefit Australia’s mining states and allow for continued expansion of the personal loan market.

Specifically, the report -

  • analyzes the relative performance of the major sectors of the Australian consumer credit market
  • reviews the drivers behind recent market performance
  • identifies changes in the market dynamics and performance of Australia’s biggest banks
  • analyzes the loan product preferences of Australian consumers
  • forecasts balances outstanding
  • forecasts future drivers of growth and product features
Scope
  • Specialist loan providers (non-authorized deposit institutions) are rapidly increasing their market share at the expense of established authorized deposit-taking institutions (ADIs), rising from 11.3% in January 2010 to 23.2% in October 2016.
  • Economic contraction in Australia’s primary mining and manufacturing states and relatively resilient economic activity across the Eastern Seaboard have caused New South Wales’ share of gross advances to rise by 6%, raising the risk of geographic concentration of debt.
  • Strong growth figures from the P2P sector mask the fundamental problem of low consumer awareness, despite high levels of online research. The small digital marketing budgets of P2P lenders relative to established banks and specialist finance lenders will likely hamper their growth prospects.
Reasons to buy
  • Which factors will impact the supply of lending?
  • Which factors will affect consumer demand for credit?
  • Which sectors offer the best prospects and opportunities for expansion over the next few years?


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