Lenders Driving Conservative Outlook Not Consumers
Australia’s Lenders Driving Conservative Outlook Not Consumers
Despite news that consumer confidence is low and the general morale is low one opinion is that it is not consumers or end-users who are fuelling the cautious approach, it’s actually the financial institutions that are holding back. And while many people still have aspirations to settle down, grow their finances and develop some sense of financial stability, they are being hindered by rigorous credit screening processes. Some sceptics say it is this phenomenon that is creating the air of apprehension in the market and that a little leeway could be the catalysing factor for reigniting the markets.
As news that the unemployment rate is creeping up hits home analysts have begun to look at the two major consequences of the process. The first is the direct impact on the consumer and the second is the impact of the loss of productivity on the banking and finance sector, which puts so much on hold until it receives the go ahead to spend the money that is available. And while consumers have a large role in how the economies move up and down it is lenders and financial institutions that are withholding funds from the people who need them, both consumers and small businesses.
The survey results from Morgan Research show that even though more than 50% of households think the current climate is a good place to buy into only 33% are confident about a few years of good financial times in the future.
The survey also reveals that Aussies are far more comfortable with short term prospects for the economy but the number of people who expect to go through bad financial times over the next year (37%) still outweighs the number of people who think that good times are in store (29%).
Furthermore, 38% say that they feel positive about their finances over the course of the next year and 19% are thinking that their family will be in a worse position financially. Some 30% are of the opinion that their families are worse off already. The banks are paying steep lending costs to overseas markets and are also under more pressure from regulators in terms of who they can grant personal loans and mortgages to. One area where there is a lot of stress is the small business sector and a number of small businesses are not awarded loans as they do not have the collateral behind them to back them up. Whether it’s a business or consumer customer the banks want established clients with proven track records to take risks with lending money to. Much financing for small businesses is fobbed off onto home equity as a way to create a financial channel.
Some experts believe that by taking banking out of the real, tangible in branch experience and into the de-personalised space of the online world, banks and lenders have lost their touch with individual people as well as their needs and potential to repay the money and that the economy is experiencing the consequences of it. On the other hand, research at Bankwest indicates that the online availability of personal loans has made it easier for the consumer to identify a loan suited to his/her lifestyle and spending patterns.
Criticisms and concerns about the strength of the local currency have also been nullified as the opinion by sceptics that the currency was being driven purely by Asian demand in the commodities sector has been proven untrue. Currency supporters are smug to report that the relationship between the two has been broken, as the Aussie dollar climbed 11% in the same time that the price of iron ore dropped 22% in the quarter to September. It is proof that there are other areas of value in the country that attracted widespread investor interest. Even the Reserve Bank’s steep cuts to the cash rate have not managed to dampen the strength of the local currency.