A comparison of the Australian and New Zealand markets over the last five years shows that the underlying pattern of movement in consumer sentiment has been quite similar. A strong upswing in 2009 to mid 2010 was followed by a fall in confidence that in both countries lasted for around fifteen months.
The improvement in confidence since early 2012 is seen in Australia and New Zealand but with one difference: the second half of 2013 saw a rising lift in confidence in New Zealand while the rate slowed in Australia.
This is consistent with the view that in Australia the widely reported problems in the manufacturing sector, the slowdown in the mining sector, the ongoing political debate about the treatment of illegal refugees and a number of state and federal political scandals have damaged confidence.
When one looks at spending on payment cards and, perhaps more importantly, the subsequent management of credit card debt, it is apparent movements in consumer confidence result in changes to credit card use with a time lag of up to 12 months. The key metrics are growth in credit card spend and management of credit card balances. In New Zealand, both of these have shown an upturn over the last six months.
In Australia however, the growth in card spend has been a little stronger whilst card balances have continued to decline – that is confidence continues to lag. There was however an indication in the last few months of 2013 that growth in card balances may soon reappear on the radar screen. At present however, balances per account are growing in New Zealand and declining in Australia.
Average Annual Balance per Credit Card Account
There are some complications to this story including the structural forces behind a shift to debit cards from credit and including regulation and new technologies. New Zealand, because of lower fee structures, has long had much more debit usage but underlying these structural issues is that New Zealand consumers have been using more credit than savings (debit) as they have become more confident.
Share of Card Purchases on Debit
Mike Ebstein is founder and principal of MWE Consulting, a specialist payment card, loyalty and reward scheme consultancy. He has nearly three decades experience in the payments business and consults to major banks and retailers.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.