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Monday, 22 September 2008
Page: 8202

Mr BRUCE SCOTT (8:01 PM) —At the end of April this year, the total balance outstanding on credit cards in Australia was some $44.4 billion. That is about twice the federal budget surplus. I know that credit cards are now a way of life. The Reserve Bank of Australia estimates that there are some 14.1 million credit card accounts across the nation and almost a million young people between the ages of 18 and 24 own a credit card. So it is important that at this time of uncertainty in the global financial market all Australians, young and old, are confident in their ability to deal responsibly and sensibly with money and debt.

I believe it is also a responsibility of Australia’s banks to provide the best knowledge and support to their customers so that they are adequately equipped to make solid financial decisions. Yet at the moment it is quite common for banks, large and small, to send letters to their customers with unsolicited offers to increase their credit card limits. All one must simply do is complete the form accompanying the letter and return it to the bank. Not much effort is involved on the part of the customer. He or she simply lets the bank dictate his or her credit limit. The customer then finds that he or she has an increased limit—sometimes substantially increased, despite the customer having been happy, most likely, with their previous limit. In fact, there is anecdotal evidence that people will take out a second credit card simply to pay off the balance on their first card without reducing any debt. This is fiscally and socially irresponsible. This is how people find themselves with uncontrollable debt.

I call on the federal and state governments to amend financial legislation so that the only way a credit card limit can be increased is by the customer approaching his or her financial institution—not the other way around. The current global financial crisis is a lesson to all that lending to a person unable to adequately repay their debt can have disastrous and far-reaching consequences. Better education is needed for borrowers. A more honest and fair approach is required by our financial institutions. With the current global financial crisis, it is imperative that we ensure Australians are adequately equipped to spend wisely and deal with debt.

The former Liberal-National coalition government understood the importance of financial responsibility. Not only did we pay off the previous government’s $96 billion debt but we also handed the current Labor government a $20 billion budget surplus and provided Australians with a secure, robust economy; one in which they could have faith and confidence. In 2005 we established the Financial Literacy Foundation to give Australians easy access to important financial information and advice.

Last year the foundation released its report on the financial literacy of Australians. Whilst it is reassuring to see that Australian consumers consider themselves to be confident in their ability to deal with credit card debt, some of the report statistics were rather alarming. Twenty per cent said that they do not regularly pay off the balance owing on their credit cards, 13 per cent said that they make the minimum repayment on their credit card balance and 17 per cent said that they were not comfortable with their level of debt.

Supporting my motion is the alarming statistic that 21 per cent said that they will use debt to buy things that they cannot afford. One in five Australians are buying items that they cannot afford, yet our banks regularly send them letters offering to increase their credit card limit. This is simply not financially responsible and we must ensure that we do everything in our power to ensure Australians do not fall into a cycle of debt. I commend the motion to the House.