Current economic conditions, customer behaviour and mitigating risk Daniel Greenhoff MICM COO Recoveriescorp
At the end of last year, it was thought Australia’s
In theory, these factors should be having a positive
economy would be hitting a sweet spot around
impact on income and affordability and boost
now. However, the current instability says
debt repayments. However, the other side of the
otherwise.
affordability coin is causing uncertainty.
At the crux of this fragility are many factors. These
Impacts to expenditure
include strong economic expansion, inflation increases, reduced stimulus, debt program
Median weekly advertised rental rates increased
resumption, soaring energy and food prices,
4.7 per cent over the three months to December
Russia’s invasion of Ukraine, a low unemployment
2021 – the largest of any period over the past five
rate, and a demand for higher wages.
years.
To help you identify specific credit risks in the
Household spending increased in seven categories
midst of this, we have identified several monetary
in 2021 – the largest in recreation and culture
factors currently impacting consumer incomes and
(+11.3%), food (+9.7%), and clothing and footwear
expenses and ultimately affecting their behaviour
(+9.6%). The Consumer Price Index (CPI) also rose
and ability to repay debt.
2.1% this quarter and 5.1% over the 12 months to the March 2022 quarter. With the Eastern Europe
Impact to incomes
conflict further driving up prices, inflation will
Right now, unemployment is down to 4 per
outpace wage growth.
continue to steadily increase next quarter and
cent, with many predicting a further drop in Q4. Between January and February, the number of hours people worked also increased by 8.9 per cent in seasonally adjusted terms.
The resulting credit risk Given the economic instability, customer sentiment and confidence are being affected, leading to
The national Wage Price Index (WPI) rose by 0.7
credit risk.
per cent in Q4 21, with the annual rate now at 2.3 per cent. Meanwhile, the March 2022 flood
We are seeing a consistent downward trend in
disaster relief and support packages banks and
Arrangements and Promise to Pay in Full values
the government provided led to pockets of money
as consumers are hesitant to commit to larger
coming in.
amounts.
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AICM Risk Report 2022
