Research: Australia at Moderate Risk in Terms of Overall Leverage

Quotes from Standard Chartered:

-We place Australia in the 'moderate risk' category in terms of overall leverage. As the economy rebalances structurally and the focus turns to domestic consumption and non-resource-led growth, Australia's Achilles' heel is in the household sector. The country's total debt level is low overall compared to other major economies, but the high level and concentration of debt among households is an area of vulnerability. 

-The Reserve Bank of Australia (RBA) has reduced the policy cash rate by 200bps since November 2011 to a low of 2.75%. Easy credit, a booming housing market and a push for greater consumer consumption can be a risky combination if households leverage up excessively. In Australia's case, though, domestic conditions have led to softer demand for debt from businesses and households as they consolidate following high levels of debt earlier.

-Recent data indicates that households are moving in the right direction, taking advantage of current low interest rates to repay their existing debt and deleverage. Further deleveraging from high levels is needed to ensure adequate debt repayment capacity as interest rise in the future, in our view. 

2013-7-3 18:01

Slump In UK Household Finances Eases In January: Markit

An index of personal finances of U.K. households declined at a slower pace in January, helped mainly by improved perceptions about inflation, job security and credit availability, data from a survey by Markit Economics showed Monday.

The seasonally adjusted household finance index, which is designed to anticipate changing consumer behavior, moved up to 37.7 in January from 36.8 in December, which was the lowest reading in seven months.

Around 31 percent of respondents noted a deterioration in their financial situation, compared to 6 percent that saw an improvement. An index reading below 50 indicates decline in confidence, while one above suggests improvement.

The measure of households' intention to make major purchases fell at the slowest pace since October 2010, while job security dropped the least since the survey began in early 2009.

The outlook component of the index showed that British households are the least pessimistic about prospects for their personal finances in the next twelve months. At the same time, sentiment regarding ease of access to unsecured credit turned the least downbeat in the four-year survey history.

"The unfavorable economic backdrop and squeezed incomes are clearly making it difficult to keep household finances on an even keel," Markit Senior Economist Tim Moore said.

"Overall, however, households are having to making hay while the sun isn't shining, and January's upturn from the lows of 2012 suggests that some gradual financial improvements are being made in spite of fragile conditions across the UK economy."

2013-1-21 09:34