Consumers Eat More Data For The Same Price – ACCC

The Australian Competition and Consumer Commission has published its annual reports on the telecommunications sector for 2014–15. This year’s reports show that consumers continue to benefit from competition in the sector. However consumers in regional areas are less well served.

“Consumers are reaping the benefits of competition in the form of increased data allowances, new services, and lower prices,” ACCC Chairman Rod Sims said.

“Consistent with the trend in recent years, consumer demand for data is continuing to increase and is affecting both fixed and mobile networks.  On fixed networks, data consumption grew by 40 per cent to 1.3 million terabytes (TB) of data. On mobile networks, data consumption increased by 35 per cent to 110 000 TB.”

“The increase in demand for data is largely due to the popularity of audio-visual streaming services, including the introduction of subscription video on demand (SVOD) services such as Netflix, Presto, and Stan,” Mr Sims said.

Industry members have responded to the increase in demand by investing in their fixed and mobile networks to make sure that they have sufficient capacity to meet the data traffic.

Service providers have also responded by increasing data allowances. During 2014-15, data allowances increased by over 70 per cent for DSL internet services and more than doubled for post-paid mobile services.

At the same time, overall prices fell by 0.5 per cent in real terms in 2014-15.

“While a smaller reduction than in the previous eight years, which has seen a 3.3 per cent fall each year on average, this indicates that competition on factors other than price has been a feature of the market,” Mr Sims said.

“Given this, the ACCC will continue to take a particular interest in ensuring consumers receive accurate information about network performance.”

A number of important mergers and new alliances occurred in the past year, including TPG’s acquisition of iiNet and NBN Co’s acquisition of Optus’ hybrid fibre coaxial (HFC) network.

“The fixed broadband market is now relatively concentrated and further consolidation would receive close attention from the ACCC,” Mr Sims said.

The recent industry consolidation may reflect a desire to grow not only in response to increasing data traffic, but also to the growing presence of the National Broadband Network (NBN). The rollout of the NBN is one of the most significant features of the telecommunications market with nearly 700, 000 active services in 2014–15. The scale and complexity of the multi-technology mix NBN and its implications for competition and consumers continues to be a major area of ACCC interest.

“The communications sector faces a number of challenges in the transition to the NBN and as network operators manage increasing data traffic. We will continue to watch these developments closely and work to ensure that consumers continue to benefit from competition”, Mr Sims said.

 

WA and QLD Bears The Brunt of Personal Insolvencies In March Quarter

According to the latest data from the Australian Financial Security Authority, pressure is mounting in WA, with personal insolvencies in the March quarter 2016 compared to the March quarter 2015 rising 26.0%, bankruptcies increasing 19.6% and debt agreements in WA are now the highest on record. However Queensland has the highest number of insolvencies across the states with 2,197 recorded events in the quarter. This is a bellwether for mortgage defaults and house prices.

Across Australia, the number of personal insolvencies increased 2.0% in the March quarter 2016 (7,129) compared to the March quarter 2015 (6,989). It also increased 1.9% compared to the December quarter 2015 (6,994). The rise in personal insolvencies in the March quarter 2016 is the fourth consecutive rise when compared to the same quarter in the previous year.

Quarterly personal insolvency activity in AustraliaCases of personal insolvency are represented by bankruptcies, debt agreements and personal insolvency agreements.

Insolvency-3Queensland had more than 30% of the events, a little ahead of NSW at 28%, VIC at 20% and WA 10%.

Insolvency-1However, WA had the strongest rises year on year, followed by debt agreements in QLD with a rise of 25%. The 60% rise in NT is statistically small, though significant to those involved.

Insolvency-2WA also recorded the highest proportion of insolvencies which were business related at 19%, whilst QLD was at 18.5%.

Insolvenvcy-4Note that these figures refer to personal administrations under the Bankruptcy Act only (and not corporate insolvency). A business related bankruptcy is defined as being one in which an individual’s bankruptcy is directly related to his or her proprietary interest in a business.

Controversial history of Road Safety Tribunal shows minimum pay was doomed from the start

From The Conversation.

The federal government is rushing to abolish the Road Safety Remuneration Tribunal (RSRT) after the tribunal issued a controversial pay order establishing a national minimum pay rate and unpaid leave for truck drivers. This latest move is not surprising as the tribunal has had a short history plagued by controversy.

The government has indicated that, in legislating to abolish the RSRT, it will shift some of its functions to the National Heavy Vehicle Regulator (NHVR). The NHVR’s role is usually holding various stakeholders, like trucking companies and owner-operator truckers, accountable for implementing safe work practices, but its jurisdiction doesn’t extend to pay orders.

Given that abolition of the RSRT is foreshadowed because of its role in setting pay rates for contractor drivers, it is very unlikely the government will seek to add this function to the NHVR.

The history and purpose of the RSRT is rooted in addressing the problem of a uniform pay for truckers. When it was established in 2012, it was tasked with promoting safety in the road transport industry, primarily through pay.

It was created after the National Transport Commission found in 2008 that there was a link between driver remuneration and safety outcomes for truck drivers. The commission recommended a national scheme to set minimum safe rates for employee and owner drivers.

The tribunal is independent from the Fair Work Commission and regulates both employee drivers and contractor drivers, their employers and hirers and participants in the supply chain, such as supermarkets.

At first the RSRT spent time examining a broad range of stakeholder submissions from all parts of the road transport sector and engaged in widespread and lengthy consultation with industry stakeholders. From this, the main outcome has been two orders: the Road Transport and Distribution and Long Distance Operations Road Safety Remuneration Order 2014 (Road Transport Order) and the most recent Contractor Driver Minimum Payments Road Safety Remuneration Order 2016 (Payments Order).

The tribunal had only been established for 14 months when the Abbott Coalition government in 2013 contracted Jaguar Consulting to assess the RSRT’s operation.
In April of that year, Jaguar Consulting reported that the tribunal had achieved little of a concrete nature (it was yet to issue the 2014 order).

For the Jaguar report authors, only evidence of a decline in collisions and fatalities among truck drivers would have been valid indicators of whether the RSRT had improved road safety. Given that the RSRT had been in operation for such a short time and had yet to make any orders, that sort of data did not yet exist.

The Jaguar report did provide data showing that heavy vehicle collisions and fatalities had declined in recent years by a similar proportion to other forms of road transport. It attributed this to improvements in road safety generally. However, the the latest data on which it drew was from 2012, prior to the establishment of the RSRT.

In making its first order in 2014, the Road Transport Order, the RSRT set out minimum entitlements and requirements such as safe driving plans, payment time, drug and alcohol policies, training, whistle-blower protection and dispute resolution. The only specific provision regarding remuneration was Part 4, which imposed a requirement that when owner drivers issue invoices for payment they must be paid within 30 days.

The payment order in 2016, now the subject of considerable political discussion, established national minimum rates and unpaid leave to come into force on April 4, 2016.

It is not surprising that some owner drivers are anxious about this payment order and want its operation delayed. These drivers are probably among the most poorly remunerated in the industry and have extensive debt wrapped up in their trucks. Many are making a marginal living at best.

However, this situation cannot go on forever. Their situation will not improve until the supermarket chains, product manufacturers and other organisations at the top starting negotiating decent pay into their contracts. If the RSRT is abolished, these corporations will continue to avoid responsibility.

To assist in this transition, the federal government should be looking at developing a structural adjustment policy to ease the concerns of owner drivers as change occurs. Instead, the government is proposing to abolish the RSRT and transfer its powers to the NHVR.

The NHVR is a national body set up by an intergovernmental agreement between federal, state and territory governments. It relies upon matching legislation passed in each jurisdiction. Gaining agreement to substantial changes in its role cannot be done overnight or by the stroke of a pen in Canberra.

If, as the National Transport Commission said in 2008, the remuneration of drivers is linked to safety outcomes, owner driver safety will remain a long way off.

Author: Louise Thornthwaite, Senior Lecturer, Department of Marketing and Management, Macquarie University, Macquarie University

Will The Trucking Industry Be Safer With Higher Wages?

Two weeks ago we discussed the possible fall out from the proposed Road Safety Remuneration Tribunal (RSRT) order which implements a minimum rate for contractor drivers through the Contractor Driver Minimum Payments Road Safety Remuneration Order.

Now it appears the PM is acting, in response to owner drivers, some of whom appeared with him at press conferences to say they will be put out of business if they need to pay these minimum hourly rates.  The Government is arguing there is no link between pay rates and safely outcomes. Others suggest that the real agenda is that big business has woken up to the potential higher costs of transport which will impact their businesses, so they are wanting to resist the changes, which by the way are not relevant to large transport operators.

So what is the evidence?

The Government’s own reports show the transport industry is the most unsafe industry in Australia, with higher fatalities than any other − 12 times the average rate of all industries – and that RSRT orders will reduce crashes by 28 per cent.

The Review of the Road Safety Remuneration System Final Report from January 2016 was prepared by PricewaterhouseCoopers (PwC) in their capacity as advisors to the Commonwealth Department of Employment. They concluded:

“the focus of the System should be on the link between remuneration and road safety and only once the link has been appropriately established should those issues be targeted proportionately and directly”.

“our analysis of the costs and benefits of the System suggest that there will be a significant cost to the economy when both Road Safety Remuneration Orders are in effect, with any potential safety benefits significantly outweighed by the associated costs”.

“consistent with the direction set out in the Government’s Guide to Regulation it is hard to see how any system that results in a net cost to the economy could be aligned with government priorities and policies”.

Yet they cite data showing that since heavy vehicle national laws were adopted in 2014, accidents have reduced.

Trucking-1

They say “on balance, there is not enough evidence to conclusively prove that the Road Transport Order has had an impact on safety outcomes given the multiple causal factors affecting road safety. In addition to perspectives that the System has had no impact on safety outcomes, stakeholders conveyed to PwC that there is widespread non-compliance with the Road Transport Order within the industry due to its ‘unworkability’. If that is the case, it would be difficult to conclude that the introduction of the Order, which requires changed practice within supply chains is having any effect if it has indeed, not changed those practices”.

 

The key question is, to what extent do pay rates have a direct impact on safely? This must be answered before decisions are taken.

Millennials v baby boomers: a battle we could have done without

From The Conversation.

The generation of young people who came of age during the new millennium – “millennials”, as they’re commonly known – has divided opinion like no other. Some have deemed them a self-pitying and entitled bunch; lazy, deluded and narcissistic. Others take a more sympathetic view, raising concerns that millennials are at risk of becoming a “lost generation”. After all, they are making the transition into adulthood under much more precarious circumstances than their parents experienced as part of the “baby boomers” generation.

The challenges millennials face include the rising costs of education; an increased likelihood of unemployment and underemployment – even for a growing number of graduates – and falling incomes even when they are employed. For millennials, home ownership is an increasingly distant prospect, and private rents are soaring. To top it all off, young people have been hit particularly hard by benefit sanctions and cuts to public sector funding.

Since the global financial crisis, the supposed plight of the millennials has given rise to the argument that inequality is an age-related issue: young people are disadvantaged, while baby boomers collectively prosper at their expense. This idea is exemplified by the Guardian’s recent series on millennials, and perpetuated by other outlets. With austerity and weak economic growth ensuring that the opportunities for younger people are comparatively diminished, even academics are raising “the issue of youth-as-class”.

Facing the changes

We don’t deny that the experience of being young has changed significantly. But this notion of a single millennial experience deserves some serious questioning. While young people are encountering changes – and often challenges – in terms of employment, education and housing, they do not all experience this hostile landscape in the same way.

By talking about “the millennials” as a disadvantaged group, we’re in danger of obscuring other, more fundamental differences between young people. For example, class background is still a particularly important determinant of a young person’s life chances. Our ownresearch – as well as the work of many others – demonstrates the importance of parental support for young people transitioning into adulthood.

Where’s my parental support? from www.shutterstock.com

Having a room in the family home or access to other family finances is key to undertaking unpaid internships or volunteer work. A monthly allowance from your folks while at university facilitates access to important CV building activities, which top graduate employers seek from applicants. It ensures that during your exams you don’t have to carry on looking for a job, and it helps you to avoid the choice between eating or heating.

Gifting or loaning deposits for a rented or purchased home is still a middle-class practice. There are many other ways that parents can, and do, use their resources to help their children onto the property ladder.

Class struggle

So, while middle-class young people are clearly facing difficulties during their transition to independence, they are also more likely to have access to resources that are unavailable to their less-advantaged peers, which help to reduce risks and protect them from uncertainties. These resources help young people to “weather the storm” and influence who survives and prospers in the current conditions.

Let us recall some other significant class-based advantages: higher education remains very stratified, and those attending elite research-intensive institutions are disproportionately middle class. Children of middle-class parents earn more than peers of working class origins, even when they obtain employment in top jobs. And while baby-boomers may be holding onto the housing stock for now, the children of the property-owning middle classes will one day inherit it.

What’s in an age? from www.shutterstock.com

As well as class, research has long shown how gender, race, disability and a host of other factors work to shape a person’s future. More recent evidence suggests that the financial crisis and subsequent austerity have had a particularly disproportionate effect on women, certain black and minority ethnic groups and the disabled.

What’s more, proclaiming an inter-generational war unhelpfully clouds the fact that the prospects for certain groups of older people are just as bad – if not worse – than for many young people. Despite the dominant media image of the resource-rich retiree, many older people do not have comfortable pensions, homes or savings to fall back on. And as the state withdraws funding for public services such as social care, older women have been forced to step in and undertake unpaid labour by caring for elderly family members.

Declarations of inter-generational conflict between baby boomers and millennials might grab headlines. But the real story is the same as it ever was; that our society is plagued by long-standing, ongoing inequalities relating to class, race and gender. The portrayal of millennials as victims has allowed the experience of the squeezed middle class to take centre stage. Now, it’s up to us to question who’s really at a disadvantage in our society – and how we can make life fairer for all.

Authors: Steven Roberts, Senior Lecturer in Sociology, Monash University; Kim Allen, University Academic Fellow – Sociology , University of Leeds

Rents continue to rise despite national building boom

From Australian Broker.

Rents in most capital cities continue to rise due to an ongoing shortage of rental properties, according to the March Domain.com.au Rental Report.

Unit rents increased in Sydney, Melbourne, Brisbane, Hobart and Canberra over the March quarter, the report revealed.

Domain.com.au senior economist Dr. Andrew Wilson says rents remain at record levels despite the recent national apartment building boom intending to provide more available rental stock to capital city markets.

“Despite the recent influx of home building, we can expect to see upward pressure on both house and unit rents in most capital cities continuing in the foreseeable future.

“However, the clear exceptions to tight capital city rental markets are Perth and Darwin. Rents in these cities continue to fall reflecting the impact of the downturn in the resource economy and the end of the significant rental demand driven by a fly-in fly-out workforce.”

In Sydney, median unit rents increased sharply over the March quarter. The median unit rent was recorded at $520 per week, whilst for houses it was $530. Sydney unit rents have now increased by 4% over the past year.

Weekly median prices for houses remained unchanged over the March quarter, however, have increased by 1.9% over the year.

“Despite the significant numbers of new apartments entering the market, Sydney unit rents bounced back this quarter with a sharp 4% increase in the median weekly rental. This increase offers no relief for tenants with house rents remaining at record highs and already low vacancy rates continuing to tighten,” Dr Wilson said.

In Melbourne, median weekly unit rentals increased to $380 over the March quarter, reflecting a 4.1% annual increase – the highest unit rental growth rate of all capitals.

Melbourne house rents consolidated at the record $400 per week, an increase of 2.6% over the year.

“It has been a positive quarter for investors in Melbourne with unit rents now rising to record levels and vacancy rates falling, despite an unprecedented new apartment boom. Melbourne house rents remain at peak values as well, with low vacancy rates indicating no relief in sight for tenants,” Dr Wilson said.

House and unit rents in Brisbane increased by 2.5% and 2.7% respectively over the past year. In Adelaide, unit rents remained unchanged while house rents climbed by 2.9%.

House rents rose by a massive 6.1% in Hobart while unit rents rose by 1.8% over the year.  In Canberra, house rents increased by 4.4% over the past year with unit rents up by 1.3%.

Rents in Perth and Darwin, however, declined over the year. The median weekly house rent fell by 11.1% in Perth and unit rents fell by 9.1%. Darwin house and unit rents also fell steeply over the past year, down 15.4% and 13.5% respectively.

Mortgage Delinquency Mapped

Today we release the latest modelling of our mortgage probability of default, and a map showing the current and predicted default hot spots across Australia. The blue areas show the highest concentrations of mortgage defaults. The average is 1.2%, but our maps show those areas a little above the average (1.2%-1.7%) and the most risky (above 1.7%).  The highest risks are more than twice the national average.

PD-April-2016Mining heavy states and post codes are under the most pressure.

As part of our household surveys, we capture data on mortgage stress, and when we overlay industry employment data and loan portfolio default data, we can derive a relative risk of default score for each household segment, in each post code. This data covers mortgages only (not business credit or credit cards, which have their own modelling).

Given that income growth is static or falling, house prices and mortgage debt is high, and costs of living rising, (as highlighted in our Household Finance Confidence index) pressure on mortgage holders is likely to increase, especially if interest rates were to rise. In addition, the internal risk models the major banks use, will include a granular lens of risk of default.

So, some borrowers in the higher risk areas may find it more difficult to get a mortgage, without having to jump through some extra screening hoops, and may be required to stump up a larger deposit, or cop a higher rate.

In QLD, locations including Camooweal, Clermont, Theodore, Loganlea and Gulngai score the highest.

In NSW, locations including Quirindi, Stanhope Gardens, Duri, Greta and Brewarrina scored high.

In VIC, Berwick, Endeavour Hills, Darnum, Moonee Ponds and Pascoe Vale scored the highest.

In WA, Butler, Port Kennedy, Merriwa, Secret Harbour and Nowergup scored high.

In SA, Montacute, Marree, Macclesfield, Stirling and Uraidla scored the highest.

 

Australia’s Most Hated Fees Revealed

ATM fees frustrate Australians more than other banking and credit card fees and travel booking fees according to new research from ING DIRECT. Almost all Australians will take some action to avoid paying ATM fees – half will walk 10 minutes out of their way to get to a free ATM and 42 per cent will buy something they don’t need to get cash out.Almost half of the people who hate travel fees feel they are being ripped off. Top 5 accepted fees include Wi-Fi, restaurant service charges and mobile data roaming

Almost three quarters of people (72 per cent) who hate ATM fees say that it is because they believe it’s a service that should be free.

Psychologist Amanda Gordon explained, every day millions of people are feeling the frustration of paying fees and charges they think are unfair.

“Fee frustration may not seem significant, but these feelings of resentment can impact our ability to maintain a positive outlook in other aspects of our lives. Financial issues are regularly raised as a cause of stress for Australians, particularly among young women. Interestingly, ING DIRECT’s research shows that millennials and women were more likely to feel frustrated or angry about paying fees.”

“Bad spending habits are hard to break. Just like other habits, we need to become aware of what we are doing, stop following that same well-worn pathway without thinking, and actually notice where our money is going, rather than just complaining that it is disappearing. The best way for Australians to get ahead is to consciously and regularly focus on their finances by practicing money mindfulness,” said Gordon.

Apathy costing Australians dearly when it comes to paying unnecessary fees

John Arnott from ING DIRECT said people should not have to pay fees to access their own money.

“When you think about the total cost Australians pay in fees and charges it can have quite an impact on the family budget, which is already strained for many people.”

“Australians waste $500 million on ATM charges each year so it’s no surprise that’s the fee that tops the list. Our research shows almost all Australians will take some action to avoid ATM fees, but still too many people are paying. If you make two or three withdrawals a week, you are talking more than $300 a year, which is $300 too much,” he said.

Top ten fees Aussies find hardest to bear

  1. ATM fees
  2. Bank monthly account fees
  3. Booking fees for events and tickets
  4. Credit card surcharge fees
  5. Credit card annual fee
  6. Travel fees (e.g. airline booking fees)
  7. Fee for receiving a paper statement by mail
  8. Charge to use public toilets
  9. Road toll charges
  10. Late payment fees

Top five fees Aussies accept

  1. Wi-Fi fees
  2. Restaurant service charges
  3. Mobile data roaming charges
  4. Parking meter fees
  5. Currency conversion fees

Melbourne our fastest-growing capital

Melbourne is officially Australia’s fastest growing capital city, according to data released today by the Australian Bureau of Statistics (ABS).

Melbourne’s population grew by 2.1 per cent in 2014-15, down slightly from 2.2 per cent last year, but still higher than the next-fastest growing capital, Darwin (1.9 per cent).

Perth, which has been one of the fastest-growing capital cities since the mid-2000s, grew by 1.6 per cent in 2014-15 (down from 1.9 per cent last year) and now sits equal fourth with Brisbane, behind Sydney (1.7 per cent).

“Although Perth’s growth slowed to its lowest rate since 2004-05, it was not the only city to experience weaker growth,” said ABS Director of Demography Beidar Cho.

“Of all the capitals, only Hobart (0.8 per cent), Canberra (1.4 per cent) and Darwin (1.9 per cent) grew faster in 2014-15 than in the previous year”.

Australia’s capital cities accounted for the vast majority (83 per cent) of the nation’s total population growth in 2014-15, with most growth occurring in outer suburban and inner city areas.

The fastest growing areas in each state and territory were Cobbitty – Leppington (New South Wales), Cranbourne East (Victoria), Pimpama (Queensland), Munno Para West – Angle Vale (South Australia), North Coogee (Western Australia), Rokeby (Tasmania), Palmerston – South (Northern Territory), and ACT – South West (Australian Capital Territory).

New South Wales – Sydney is well on target to becoming the first Australian capital city to reach 5 million people, growing by 83,300 in 2014-15 to hit 4.92 million.

Victoria – Melbourne had both the largest (91,600) and fastest (2.1 per cent) population increase of all Australian capital cities in 2014-15.

Queensland – Brisbane’s population may be increasing at its slowest rate for over a decade, but Queensland has some of the largest-growing regional areas in the nation.

South Australia – Adelaide’s outer suburbs may be experiencing the largest population increases, but some of the city’s fastest growth is occurring in its inner areas.

Western Australia – Perth’s growth has slowed to its lowest rate for a decade, increasing by 1.6 per cent in 2014-15 compared with 1.9 per cent in 2013-14.

Tasmania – Although growing at the slowest rate of all capital cities (0.8 per cent in 2014-15), Hobart is the only Australian capital to record an increasing rate of population growth in each of the last three years.

Northern Territory – Darwin remains one of the fastest-growing capital cities in Australia, increasing by 1.9 per cent in 2014-15, second only to Melbourne (2.1 per cent).

Australian Capital Territory – The newly-developed suburbs of Canberra’s Molonglo Valley are the fastest-growing areas in Australia. The population of ACT – South West, which includes the new suburbs of Wright and Coombs, grew by 127 per cent in 2014-15.

Four reasons payday lending will still flourish despite Nimble’s $1.5m penalty

From The Conversation.

The payday lending sector is under scrutiny again after the Australian Securities and Investment Commission’s investigation into Nimble.

After failing to meet responsible lending obligations, Nimble must refund more than 7,000 customers, at a cost of more than A$1.5 million. Aside from the refunds, Nimble must also pay A$50,000 to Financial Counselling Australia. Are these penalties enough to change the practices of Nimble and similar lenders?

It’s very unlikely, given these refunds represent a very small proportion of Nimble’s small loan business – 1.2% of its approximately 600,000 loans over two years (1 July 2013 – 22 July 2015).

The National Consumer Credit Protection Act 2009 and small amount lending provisions play a critical role in protecting vulnerable consumers. Credit licensees, for example, are required to “take reasonable steps to verify the consumer’s financial situation” and the suitability of the credit product. That means a consumer who is unlikely to be able to afford to repay a loan should be deemed “unsuitable”.

The problem is, regulation is just one piece of a complex puzzle in protecting consumers.

  1. It’s going to be difficult for the regulator to keep pace with a booming supply.Nimble ranked 55th in the BRW Fast 100 2014 list with revenue of almost A$37 million and growth of 63%. In just six months in 2014, Cash Converters’ online lending increased by 42% to A$44.6 million. And in February 2016, Money3 reported a A$7 million increase in revenue after purchasing the online lender Cash Train.
  2. Consumers need to have high levels of financial literacy to identify and access appropriate and affordable financial products and services.The National Financial Literacy Strategy, Money Smart and Financial Counselling Australia, among other providers and initiatives, aim to improve the financial literacy of Australians, but as a country we still have significant progress to make. According to the Financial Literacy Around the World report, 36% of adults in Australia are not financially literate.
  3. The demand for small loans is high and yet there are insufficient supply alternatives to payday lending in the market.The payday loan sector dominates supply. Other options, such as the Good Shepherd Microfinance No Interest Loan Scheme (NILS) or StepUP loans, are relatively small in scale. As we’ve noted previously, to seriously challenge the market, realistic alternatives must be available and be accessible, appropriate and affordable.
  4. Demand is not likely to decrease. People who face financial adversity but cannot access other credit alternatives will continue to seek out payday loans.ACOSS’s Poverty in Australia Report 2014 found that 2.5 million Australians live in poverty. Having access to credit alone is not going to help financially vulnerable Australians if they experience an economic shock and need to borrow money, but lack the economic capacity to meet their financial obligations.

    Social capital can be an important resource in these situations. For example, having family or friends to reach out to. This can help when an unexpected bill, such as a fridge, washing machine or car repair, is beyond immediate financial means. Yet, according to the Australian Bureau of Statistics General Social Survey, more than one in eight (13.1%) people are unable to raise A$2,000 within a week for something important.

Coupled with regulation, these different puzzle pieces all play an important role in influencing the entire picture: regulators and regulation; the supply of accessible, affordable and appropriate financial products; the financial literacy and capacity of consumers; people’s economic circumstances; and people’s social capital.

Previous responses to financial vulnerability have often focused on financial inclusion (being able to access appropriate and affordable financial products and services), financial literacy (addressing knowledge and behaviour), providing emergency relief, or regulating the credit market. Dealing with these aspects in silos is insufficient to support vulnerable consumers.

A more holistic response is needed: one that puts the individual at the centre and understands and addresses people’s personal, economic and social contexts. At the same time, it must factor in the role of legislation, the market and technology.

The Turnbull government recently committed to “creat[ing] an environment for Australia’s FinTech sector where it can be internationally competitive”.

With more online lenders coming, it’s important we work towards strengthening people’s financial resilience.

Improving the financial resilience of the population, coupled with strong reinforced regulation, will help to protect financially vulnerable Australians from predatory lenders.

Authors: Kristy Muir, Associate Professor of Social Policy / Research Director, Centre for Social Impact, UNSW Australia; Fanny Salignac,
Research Fellow – Centre for Social Impact, UNSW Australia; Rebecca Reeve, Senior Research Fellow, Centre for Social Impact, UNSW Australia