Australian Consumers Defaulting on Smaller Debts Earlier in Life

Australian consumers are defaulting on increasingly smaller amounts of debt and at even earlier stages of their life, potentially ruining their chances to access affordable credit in the future and placing additional cash flow pressures on Australian business, according to the latest default trends data from Dun & Bradstreet (D&B).

D&B is Australia’s leading collections, credit reporting and business intelligence company.

The D&B default trends data reveals that:

• almost half (47%) of all consumer debt referred to D&B is less than $400
• 50% of debtors are aged less than 32 years of age, a 25% increase on 2006
• Aussie males are more likely to default than women, with the exception being telecommunications debt 
• Australian men are also less likely to ever repay these debts
• rural Australians are better at paying up following a default than those in metropolitan areas.

Christine Christian, Dun & Bradstreet CEO, says the new data from D&B points to both the increased pressure being placed on business cash flow and the risk young people in particular are placing on their ability to access affordable credit for home and car ownership.

“We already know from our quarterly trade payments data that normal payment terms have almost doubled to 56 days from the standard 30 day period, placing business cash flow under pressure,” said Christian.

Christian continued, “Now with the release of the D&B default data we can see that business has to go to the expense of chasing smaller and smaller amounts of outstanding monies. However they have no choice as the small amounts can add up to a considerable amount of money, particularly for small business. On the consumer side the concern is that Australians, and particularly young Australians, are running the risk of a black mark on their credit report for small amounts of money. However this small amount can have a very big impact on a persons’ ability to access affordable credit for major purchases like cars and property.”

State vs. State

New South Wales (NSW) consumers are incurring larger average value debts than any other state or territory – 27% larger than those of Victorian consumers. Suppliers can also expect to recover the least amount of their outstanding debt from NSW consumers, whilst individuals residing in the ACT are 36% more likely to pay their outstanding bills than the average Australian.

Men vs. Women

Overall, with the exception of the telecommunications industry, Australian men are incurring more debt per capita then Australian women.

Findings indicate that when it comes to entertainment related services, per capita; Australian males are 22% more likely to incur a debt, and for banking and finance related debt, per capita they are 3 times more likely to default. When it comes to paying phone bills however, women are getting themselves into more financial trouble than their male counterparts.

Country vs. City

The latest trending data from D&B indicates that consumers living in regional areas are incurring more debt per capita than those living in metropolitan areas, however the average debt amount incurred is 23% less than that of a metropolitan resident.

Findings also indicate however that once the debt has been incurred, country consumers are 23% more likely to pay their debt than metropolitan consumers.

There is however a number of things that business can do in order to prevent outstanding debts from crippling a company through reduced cash flow.

“The response can be as simple as ensuring that a business credit checks its customers and suppliers, to ensure that they have both the capacity to pay and a good history of paying, and that there are clear processes and policies in place for receivables management,” said Christian.