Linda Daniele and Angus Hohenboken
From: The Australian
October 14, 2008 12:00AM
EDDY Jeelany cast a lonely figure in the Harvey Norman electrical store at Sydney’s Moore Park shopping centre yesterday.
Surrounded by walls of plasma television screens relaying news flashes through the day, the audio-visual manager is constantly reminded of the world’s dire financial situation.
In-store financing has dropped significantly in Mr Jeelany’s and other Harvey Norman stores in recent months — a trend he attributes to customers’ overloaded credit cards and fear caused by reports of the crisis.
“Demand for financing is declining, people are in debt and they don’t want to put themselves in the worst-case scenario,” Mr Jeelany said.
“We used to do 30-35 per cent (in-house financing), now we are down to around 10 per cent. In the stores in the western suburbs it has dropped from 60 per cent down to around 30 per cent.”
His store used to employ three finance contract writers on weekends, but now has only enough work for one.
ABS figures released yesterday showed Australians are cutting back on their borrowing in response to the economic crisis.
Personal finance contracted by 5.2 per cent, seasonally adjusted, in August, including a 7.4 per cent fall in credit-card debt.
Financial counsellors warned that consumers were struggling to pay off credit cards used for essential household expenses — with some clients racking up debt on up to 10 cards at once.
The president of the Financial Counsellors Association of NSW, Vicky Geraghty, said that as the dollar plummeted to its lowest level in four years, the pressure on credit card holders would only increase.
“The past few years we’ve seen greater reliance on credit for daily living expenses, far removed from the traditional luxury spending on plasma televisions and fancy electronic devices,” she said.
Jenny Reid, a financial counsellor in the Bankstown area, southwest of Sydney, one of the top six mortgage-stress zones in the country, said many people opted for “buy now, pay later” financing options on items they could not otherwise afford.
“I’ll be working on a budget with clients and they’ll say they can’t give up items that might normally be classed as luxuries. I’ve had clients say, ‘But I need pay-TV for the kids’,” Ms Reid said yesterday.
Just “browsing” in electrical retailer Bing Lee in Moore Park yesterday, Jason Wikman, 33, of Coogee, said he was focusing on buying necessities and paying off his mortgage.
“I don’t think there’s as much exuberance out there, especially coming up to Christmas,” the Australian Defence Force employee said.
Bing Lee sales assistant James Cristaudo encouraged shoppers to buy up now before the price of imported brands rose on the back of the weakened Australian dollar.
And he said it was harder to get customers approved for in-store financing because the banks had become more fussy with their approvals process.