Wednesday, October 1, 2014

Two million Australians risks defaulting on basic debts, credit bureau warns; 500,000 deliberately lie in credit applications

A report out today warns that more than two million Australians risk defaulting on their basic household debts over the next year.

According to an annual scorecard from the credit reference agency Veda, the bills in the too hard basket include small ones for gas, electricity and mobile phones.

The study also says half a million people have jeopardised their credit-worthiness by lying or intentionally omitting information from the credit applications.

The warning comes amid speculation that the Reserve Bank might introduce tighter lending controls to protect investors from rising interest rates and falling property values.

Economists warn that any associated rise in unemployment could see some overly-indebted borrowers defaulting on their mortgage repayments.

However, Veda spokesman Belinda Diprose says mortgage defaults are not yet problematic and the primary default risk relates to unpaid utility bills, credit cards or personal loans.

"It's those easy to miss bills that come up first - telco bills, utility bills - and then they'll move on to credit cards, personal loans and usually it’s the mortgage that's the last one to go," Ms Diprose said.

The Veda report singles out Generation Y Australians - those born in the 1980s - as having the worst scorecard, despite being the most financially ambitious.

The study found that 22 percent of Gen Ys  are likely to overspend to maintain lifestyles they can't afford and are "keeping up with the Joneses".

"They have this real fear of missing out. They're quite an ambitious group of people and they are not afraid to use credit to fund their lifestyles and to fund their goals," Ms Diprose said.

"One of the key things they need to understand is that if they do default it can really impact their ability to get credit in the future," Ms Diprose said.

However, the Veda study says slightly older Australians - Generation X - are at most risk from damaging their credit profile through late bill payments.

"Gen Xers are those who at the moment have young families and it's really hard to keep up with the daily pressures of bills for childcare and things like that," Ms Diprose said.

"So it's really important for people to understand what's on their credit history, what they can do to influence it and how it can impact them down the track when they really do need to get access to credit."

The scorecard also warns that the 500,000 Australians who have lied about their credit history need to be aware of new privacy rules where financial institutions can now view both positive and negative credit behaviour.

"It's certainly fraud. But as part of the new comprehensive credit reporting laws there's more information available for banks and lenders when they're assessing you on your credit application," Ms Diprose said.

"So if you omit for example that you have three credit cards and you only put two on it, they can see that information so it's probably best to tell the truth on your application form."

Monday, September 29, 2014

Australian shares fall on China economy concerns; Australian dollar slides to 87.1 US cents

There have been more heavy falls on the Australian sharemarket this morning in reaction to continuing concerns about China's economy.

The uncertainty has also helped take the Australian dollar to 87.1 US cents - its lowest level in seven months.

And shares in the world's biggest wine company, Treasury Wines, have been hammered as much as 15 percent  this morning after it called off $3.4 billion takeover talks with private equity firms.

Jobs to go as energy prices surge without gas reservation policy, AWU warns

A national campaign is being launched today for greater controls over Australia's natural gas exports.

The union-backed campaign wants the federal government to enact laws to ensure a certain percentage of Australian gas is kept for domestic use rather than being exported.

A study by BIS Shrapnel warns that one in five manufacturers could shut down over the next five years because of spiralling gas prices.

The "Reserve Our Gas" campaign, headed by the Australian Workers Union, comes amid fears that Australian gas prices will triple from July next year as LNG exports ramp up.

AWU national secretary Scott McDine told AM that Australia is out of step with other major nations such as the United States that reserve a percentage of gas for domestic use.

"Australians have a right to know their rapidly rising gas bills are actually completely preventable. We just need to do what every other gas-exporting nation does and bring in laws to look after the local population. Australians should pay the Australian price for gas - not the global price - because it's our gas," Mr McDine said.

"We currently have a situation in which our abundant gas reserves are hurting Australian jobs and households instead of helping them. That's crazy and it's no wonder no other gas-exporting nation allows it.

"We are throwing away hundreds of thousands of jobs, and our national competitive advantage, simply so gas exporters can squeeze a little extra profit out of what is already a spectacularly profitable business.

"Of course our abundant natural gas can and should be exported to the world. But a portion of it also needs to be providing a competitive advantage to our local industry, and a cost of living benefit to Australian consumers. We can have both, just like every other gas exporting nation."

The AWU campaign is being supported by major Australian manufacturers exposed to rising energy prices including Alcoa and Australian Paper.

The study by BIS Shrapnel, commissioned by the AWU, finds that rising gas prices will have significant impacts on the economy:

* One in five heavy manufacturers will shut down within five years

* Total manufacturing production will be reduced by 15.4 per cent by 2023

* 91,3000 jobs will be lost in this period as a direct result of manufacturing shutdowns, with 235,000 jobs to go economy-wide

The BIS Shrapnel report also notes a high profit ratio of 66 percent compared to 32 percent for iron ore producers.

While there is no national gas reservation policy, Western Australia mandates the reservation of 15 per cent of the state's gas.

The report says the WA policy has not damaged gas investment or create sovereign risk, with $88 billion invested in WA gas production since reservation was introduced in 2006.