During the December quarter 7689 people either became bankrupt, or entered Part IX debt agreements or Part X insolvency agreements.

According to the latest information provided by ITSA (Insolvency and Trustee Services Australia) there were 8012 individuals declaring bankruptcy or entering some kind of a debt agreement during the September quarter.

The December figure is a reduction of two per cent on the December quarter in 2010.

In terms of annual statistics, bankruptcies were down four per cent year on year, while Part IX agreements were up 2.9 per cent, and Part X agreements were down 3.4 per cent.

Credit card balances in Australia had fallen to $49.11 billion for October, the fourth monthly decline in credit card use since 1985 when statistics on credit card use began to be collated.

Mastercard spokesman David Masters believes that in the current economic climate consumers may have been holding off on spending to prevent any debt problems early in the new year.

But he said the Reserve Bank of Australia data also showed that consumers are putting more effort into repaying their unsecured debts than they are into reducing their home loans.

“The key measure of this is the annual growth rate in credit card repayments which hit 6.92 per cent in October 2011, well up from the 1.99 per cent recorded in October 2010,” Mr Masters said.

“Outstandings on cards now represents just 3.63 per cent of total household debt their lowest point for over 11 years.

Post GFC consumers have become significantly more aware of debt and focus on debt consolidation and repayment.

He said credit card and debit cards systems had built-in dispute mechanisms for consumers if fraud was suspected or promised goods were not provided.

Mr Masters said a rise in the number of purchases made on credit cards this month, as opposed to the decline in overall credit balances, pointed to the fact consumers may be opting to use cards for online shopping.

“One reason many consumers opt for cards is that they offer consumers a level of confidence that they are fully protected in the event of unforeseen problems with orders or purchases,” he said.

State Government Debt has rocketed by $4.4 billion over the past year, and now totals $56 billion.

Auditor-General Des Pearson has warned the state’s ability to service that debt is diminishing.

The Auditor-General’s report tabled in State Parliament yesterday, revealed that the state’s wages bill had swollen by $1 billion.

“The renegotiating of expiring major enterprise bargaining agreements will likely further increase employee expenses,” Mr Pearson said.

“This will impose additional cost pressure on the net result as employee expenses have historically grown at a rate above CPI.”

Over the past five years, inflation  has increased by 15.3 per cent, but public sector wages have soared way beyond that level, by 35.6 per cent.

Mr Pearson said  that State Government’s debt was becoming less sustainable because it was growing at a faster rate than economic output.

As a proportion of gross state product, debt represented about 9 per cent of the state’s annual output in 2006-07. By 2010-11, it had doubled to about 18 per cent.

Victorian level of debt grew last year to fund schools and transport.

People with a large number of unsecured debts as well as a mortgage could always look into debt consolidation by consolidation their unsecured debts into their home loan. Now that the home loan rates have been reduced by most lenders, debt consolidation into the mortgage will be even more cost effective. If your current lender does not want to consolidate your unsecured debts, ask others. If you do find a lender willing to assist your reduction in monthly repayments could be rather significant.

Whats more, if you could not qualify for the debt consolidation loan you were after previously, now with a lower interest rate you may just be pleasantly surprised.

It is unclear at this stage if RBA will move to reduce cash rate at their next meeting scheduled for cup day.

An online survey by mortgage broker Loan Market found that 55 per cent of respondents would reduce further their home loans should the Reserve Bank cut the 4.75 per cent cash rate when its board meets on November 1.

Only 16 per cent of the 460 people surveyed said they would use the savings from a rate cut to increase their Christmas budget, while 17 per cent said they would increase their savings.

Twelve per cent said a rate cut would make no difference to them.

Survey results make it clear that consumers are still very cautious and in these times of economic uncertainty would prefer to consolidate debts rather than take on additional loans.

A new survey for bank RaboDirect found approximately 40 per cent of Gen X say their financial situation has declined over the past 12 months, one-third don’t have enough emergency money to last more than two months, and one-third regularly only just manage to make it through to their next pay day. These people resort to maxing out credit cards, borrowing from family and friends as well as apply for payday loans to help them survive from payday to payday.

Gen X makes up about 40 per cent of the Australian population, according to the last Census, or about eight million people, which make them an influential group, RaboDirect general manager Greg McAweeney says.

Close to 2.5 million Australians in this age group always feel like they’re behind in payments and are only falling further into debt every month.

Debt recovery company Dun & Bradstreet also says Gen X is weighed down by their high levels of debts.

“For years we have been talking about whether Baby Boomers have been saving enough for their retirements but not enough attention has been paid to the fact that Gen X is carrying more personal debt than any other previous generation at a similar age,” Dun & Bradstreet chief executive Christine Christian says.

“Around 40 per cent of Gen X said they would find it difficult to meet their loan repayments, with a similar proportion reporting they would use their credit card to buy something they otherwise couldn’t afford. Once the credit cards are maxed out borrowers look at debt consolidation to reduce monthly repayments – however often this becomes a never-ending cycle of more debt.

Data from survey company TNS Consultants found 30 to 50-year-olds have a high incidence of home loans and other borrowings compared with other age groups.

“Around 66% have a credit card but in terms of repayments, this group is more likely to just make the minimum payment. This eventually brings their credit card debt into levels they can no longer afford. Given the declining values of property, borrowers who wish to consolidate credit card debt into their mortgage are finding that they either do not have sufficient equity, or sufficient income to be able to do so.

Baby Boomers are the most confident about their finances, the survey found. They know what the current interest rates are and they find dealing with their finances less stressful.

Having said this, debt consolidation into a home loan is not for everyone. First of all you must have sufficient equity in your property to qualify. That means that after you add your current home loan amount together with your unsecured debt amount the overall figure must be notably less than the value of your home. Some people do not understand that you can not consolidate debts into a new home loan with no equity.

Example 1: Property Value :$500,000,

Home Loan balance  $350,000

Other Debts : $50,000.

In this scenario your new mortgage would be $400,000 for a property worth $500,000 – that is an 80% loan and providing your income position is satisfactory, it can be done and should offer savings.

Example 2: Property Value : $500,000

Home Loan   $450,000

Other Debts : $50,000

Here the current mortgage is already at 90%. A refinance beyond that would not be possible. To consolidate unsecured debts into the mortgage, a 100% home loan would be needed – this is not available.

There can be other reasons why debt consolidation into your mortgage may not be possible or cost effective. One such reason would be where your income level has dropped and you can no longer sustain the loans you are holding. even if you have equity in your home, loan affordability determines if this is possible.

Another reason may be that you have acquired defaults since taking out your home loan. Consequently your original home loan may be with a bank at a low rate, whereas debt consolidation will necessitate refinance to a specialist lender at a higher rate, making the new home loan more expensive rather than offering you a saving.

Nonetheless sometimes a mortgage at at a higher interest rate than you are paying today, may still offer the benefit of lower monthly repayments once other debts are consolidated.

Consumer confidence remained at its lowest levels since the global financial crisis for the second consecutive month in August.

The Westpac-Melbourne Institute Index of Consumer Sentiment fell 3.5 per cent to 89.6 in August, its lowest level since May 2009.

The decline in consumer confidence in August was more severe than the decline in July.

August is the second time the index has dropped below its neutral mark of 100 since May 2009, meaning the number of pessimists now outweighs the number of optimists.

People are holding on to cash, preferring to save instead of spending. Debt Consolidation is big on the agenda of many so as to reduce the family monthly repayment obligations. Whatever spending does occur seems to be limited to online overseas shopping, with retailers finding the current situation extremely stressful.

Economic forecasters believe that continuing global market uncertainty could prompt the Reserve Bank of Australia (RBA) to begin easing interest rates by December, with a cut in the official cash rate to 4.5 per cent from its current 4.75 per cent.

Credit card reforms proposed by the Federal Government were passed by the lower house yesterday after receiving opposition support, The Australian reports.

Under the changes, over-the-limit fees will be scaled back while unsolicited credit limit upgrades will be banned altogether.

Banks will also have to alter repayment systems to ensure that when a consumer makes a repayment it is put towards their most expensive debt first.

The moves are part of the government’s attempts to increase competition in the domestic retail banking market, which is dominated by the top four.

The legislative changes apply only to new credit card accounts, despite a last-minute bid by the Greens to have the laws applied to existing accounts.

While the new legislation has not yet become law, NAB has been proactive in already abolishing over-the-limit charges and reducing its late payment fees from $30 to $5 for both new and existing accounts. NAB has further issued a challenge to its rivals to do the same.

The reforms still have to pass the Senate, but are likely to proceed without amendments.

The plan to ban mortgage exit fees has already proceeded through the Senate and accepted by the Senate.

NAB head of personal banking Lisa Gray said the bank’s move to cut the charges ahead of the government’s changes had benefited the bank.

NAB, which is the fourth-largest bank by market capitalisation, says if the CBA, Westpac and ANZ match its moves their customers could save up to $225 million.

Other banks do not need to wait – rather they should be pro-active in implementing proposed changes as these changes will benefit the customer.

The day-to-day financial struggle is such a concern that Australians are worrying more about rising living costs than people in the US, UK, Mexico, Italy and other countries in the grip of a serious financial crisis.

The Genworth International Mortgage Trends report found four in five Australians list their “biggest concern” as rising living expenses, utilities and petrol prices. Australians spend 45 per cent of income servicing debt – more than India, Italy, Mexico and the UK – compared to an average of 38 per cent.

The report, which surveyed 9000 people from eight countries on their desire to purchase homes, found 44 per cent of homeowners and potential home buyers in Australia were worried about their personal finances but still placed a priority on meeting home loan repayments.

At the same time, four out of five Australian respondents had no trouble meeting their mortgage payments over the past year and 45 per cent actually overpaid it.

There is no doubt that debt pressure is a reality for many Australians most people are very responsible and seek help once they feel that they are unable to cope.

The high cost of living was blamed for pushing the Australian dream of home ownership out of reach, with the average age of first-home buyers increasing out from 25 years in 1986 to 31 this year.

“In the US, Canada and Australia, at lease one in five potential first-home buyers were spending more their half their income on debt repayments, suggesting that the rising cost of living is making it harder for people to buy a home in these countries,” the report said.