The value of credit card purchases sank to the weakest level since April, as consumers remained wary of spending in light of a mixed outlook for the health of the economy.
Purchases on credit cards fell to $19.5 billion in September from $21.7 billion in August, according to the Reserve Bank, the lowest monthly level since April, when they were $19.49 billion. Balances on credit cards declined in September as well, to $49.1 billion from $49.2 billion in August, according to the RBA.
"Consumers are still cautious and reluctant to get into additional debt despite earlier RBA rate cuts," said Moody's Economy.com's Katrina Ell. "Consumer deleveraging is not only showing up in credit card spending, but also in the soft property market and retail trade data," she said.
Retail sales, while positive in September, have been at the mercy of fragile consumer confidence and the flow of stimulus aimed at propping up household spending. Also, capital city home prices unexpectedly sank 1 per cent in October, after four months of gains, driven in part by lower interest rates and stabilising global markets.
The RBA last cut rates by 25 basis points in October, part of a cycle that has cut 150 basis points from official rates since November 2011, in an effort to lift sentiment and spur activity in the domestic economy. Major banks, however, have passed along only about 115 basis points in cuts to mortgage borrowers in that time.
"We are cautiously optimistic that as the stimulus from 150 basis points worth of cuts filter through the economy, consumers will spend more freely in coming months," said Ms Ell.
The RBA elected to keep interest rates on hold this month, after third quarter inflation was stronger than expected and that the pace of growth in China and the US had shown signs of resilience, as well.