Consumer confidence on the rise, but are there some risks?

Consumer confidence reaches a two month high, but is this performance sustainable?

Consumer confidence reaches a two month high, but is this performance sustainable?

Unless you've been living under a rock for the last few months, you can't help but notice that Australia is currently experiencing slower economic growth than in years gone by. This has affected both consumers and businesses, highlighting effective credit management across a range of sectors. 

While there are a number of influences driving this trend, an oversupply of commodities, combined with turbulent conditions in international markets such as Greece and China, are some of the most significant factors.  

It's not all bad news 

Despite the unstable environment, we're managing to look at things with a 'glass half full' mentality. In fact, the latest ANZ and Roy Morgan Consumer Confidence Rating report found that the average Australian household feels very positive about the current economic climate, with consumer confidence the highest it's been since June.  

Why the newfound trust in the country's financial outlook? As ANZ Chief Economist Warren Hogan said, this could possibly be due to the Australian dollar holding strong in the face of a drop in the Chinese exchange rate.

"ANZ-Roy Morgan Consumer Confidence has crept up slowly in the past few weeks. While concerns around the Greek debt crisis and volatility in the Chinese equity markets worried consumers just a few weeks ago, confidence has remained broadly steady in the face of last week's Chinese exchange rate devaluation, possibly due to the fact that the Australian dollar ended the week largely unchanged," said Mr Hogan. 

Cautious footsteps moving forward 

While we may be feeling a little more optimistic about the local economy, it still remains to be seen whether this performance is sustainable. As Business Insider pointed out, unemployment rates are the highest they've been in 13 years, while wage growth has slowed to a pace not seen since the recession of the early 1990s. 

"In an environment of low wages growth combined with a soft labour market, household income growth is likely to remain weak. This, in turn, will continue to provide a constraint on growth in household consumption," explained Mr Hogan.

From a credit management perspective, keeping an eye on shifts in the economy is essential for maintaining cash flow and staying on top of debts. Slower financial growth means less purchasing power, which in turn can translate into debtors defaulting on payments and prompting a greater need for credit collection services in both the commercial and consumer sector.

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