Aussie credit defaults 'possible result of interest rate hikes'

Aussie credit defaults 'possible result of interest rate hikes'

Interest rate hikes could lead to Aussie credit defaults, according to economists.

There could be some Aussie credit defaults occurring as a possible result of interest rate hikes, industry experts have revealed.

JP Morgan economist Helen Kevans has predicted that the Reserve Bank of Australia could increase the official cash level by 100 basis points over the next year, which would be a worry, she told the Australian Associated Press.

"Interest repayments as a per cent of disposable income will be back up around that 12 per cent level, which is a big concern," she added.

Ms Kevans also pointed out that these burdens could lead to a lot of stress on households.

However, it is not all bad as making the economy stronger has a positive effect on the employment situation and she observed that this should lessen some of the blow taken from interest rate increases.

Although, the Reserve Bank of Australia (RBA) - which maintained the official cash rate at 4.5 per cent earlier this month and has not lifted levels since May - is not "overly concerned" about the rising debt levels, despite 40 per cent of Australian income earners possessing three-quarters of the country's debit.

A recent survey by Dun and Bradstreet revealed that consumer debt has risen to record levels due to defaults on commercial leases increasing.

However, this has not stopped people in the nation spending, as earlier this month the Commonwealth Bank noted in its Business Sales Indicator (BSI) - which shows the amount spent on debit and credit cards at the company's point of sale terminals - that expenditure rose by 0.1 per cent in August.

This reading was the first positive one since November last year and was helped out due to a growth in wages and a firm labour market, although the BSI was down by 2.7 per cent compared to last year.

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