How Should Australia Ride Out the Consumer Debt Crisis?
With bailouts still occurring around the world and a few countries even on the verge of financial catastrophe, it may seem like there is no end in sight to our world’s monetary and fiscal problems. At home, it has been reported for the past couple of years that Australians have the highest ratio of household and consumer debt in the world.
This means that, per capita, Australians are spending well beyond their means as a general populace, leading to loan defaults, homelessness, and utter financial despair in some instances. The time is now to stop this credit card monster and reverse this gloomy trend. But how is it possible to change the status quo when the cost of living continues to rise, forcing consumers to pay more and more for the same quality and quantity of goods as before?
Revamp Credit Card Regulatory Laws
Eight years ago was the last time significant credit card legislative reform was
seen. While it did have its intended effect of lowering interest rates from the major credit card companies themselves, it created the troublesome surcharge option for merchants and retailers, which have been proven to be financially damaging to credit card users.
The central bank would be wise to set a cap on these surcharge amounts, as they sometimes exceed even the original interest rates on cards before the new law was passed. Of course, many would view this as a good thing: more fees on credit cards means less demand for their usage. Another option would be setting even lower limits for consumers with poorer credit histories, rather than allowing the companies to have total control over these presumed limits.
Debt Counseling for Consumers
While this is gaining traction in various locations throughout the country, making it more mainstream would greatly benefit those who use these services. Many times, people spend so much, so fast, that they get crushed under and mountain of debt and don’t see a way out. Giving them access to trained financial professionals would help them to understand the grave nature of their situation and create a path to financial freedom through paying off debts and increasing their rate of saving.
More Publicity for the Benefits of Saving
Telling people to save money isn’t enough. They know they should save, but there seems to be a popular public consensus that splurging on new clothing, cinema tickets, and fancy flats is much more fun than socking the money away into an emergency savings account.
Alas, there should be more publicity as for why saving is really important (live on your own means, no credit card companies enslaving your income every month for the next several years, having money set aside for unexpected emergencies to avoid panic, etc.). The lavish, luxurious lifestyles that we see today are products of yesterday’s promotion of “the good life.” With the same tactics, we could turn the tide of this crisis by promoting the opposite: save, save, save.
Personal Finance Classes in Schools
To prevent another crisis of this magnitude in the future, it would be fantastic if schools started offering more personal finance classes. Starting kids on the right path at a young age is crucial, because right now, all they can see is a society where overspending and splurging on goods with the swipe of the plastic is the way to live. Long term, this is a terrible idea, so we need to start reinforcing responsibility now, before they get into the workforce and start making money (by then it’ll be too late).
Ultimately, there are several more solutions for these troubled times we are currently facing. Being number one in the world for the greatest amount of
personal debt is nothing to be proud of. With some painful (but necessary) cut backs on spending (both governments and individuals around the world), there may just be a light at the end of the tunnel yet.
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Category: Debt
