Living standards improved considerably in Australia during the 20th century. Households were inc reasingly able to overcome liquidity constraints and purchase an ever greater number and range of consumer durables, including furniture, refrigerators, washing machines, radios, televisions and cars. These were often items for which they lacked finance in terms of current income and/or accumulated savings. Still, households were able to purchase them, due to the increasing availability, accessibility and affordability of consumer credit.
Formal consumer credit grew quickly in Australia after World War II as a major source of finance for the purchase of goods and services for which to households and individuals lacked funds. Per head of the population, the level of consumer debt amounted to A$233 in 1950, increasing more than tenfold to over A$4,500 in 2007 (in 1989/90 prices). Just after the war, hire-purchase companies were about the only source of formal consumer credit. Today, anyone wishing to borrow money for the purchase of goods and services can choose from a wide range of financial institutions for a loan on conditions that suit the borrower best.
Despite its apparent significance in facilitating the postwar growth of consumer demand for durables, and despite a growing body of literature on the development of consumer credit in other countries (Olney 1991, 86-134; Calder 1999; Gelphi and Julien Labruyere 2000; Scott 2002; O’Connell and Reid 2005), there is no overview of the long term development and the economic relevance of consumer credit for Australia. For instance, Merrett (1997, 1998) largely ignored it in his excellent overview of the development of capital markets in Australia, possibly because it was a minor part of those markets. A major problem in studying this topic is that the sources on consumer credit in Australia are very disparate. Consistent statistical data are only available since the 1980s, which were used in recent publications. Griffiths (2000) discussed changes during 1980-96 to argue that the growth of consumer credit is not in Australia’s long term economic interest as consumers experienced increasing debt servicing problems. The Reserve Bank of Australia (RBA 2003) gauged the growth of household indebtedness during the 1990s, to conclude that nearly all it was driven by housing debt due to lower rates of interest and inflation. But how do recent trends compare to past trends and is the uptake of consumer credit in recent years unprecedented and concerning?
This article seeks to offer a historical overview of the development of the supply of consumer credit in Australia, by drawing on an array of disparate sources. It seeks to establish the circumstances that facilitated the emergence and growth of financial firms that specialised in consumer credit, particularly finance companies. The next section discusses the main government regulations impacting on the consumer credit industry in Australia and establishes the regulatory context in which the industry developed. This is followed by a brief section that identifies the broad quantitative patterns of the development of consumer credit. The remaining sections then discuss the growth of the industry before World War II, during the 1940s-1970s and since the 1970s. This article focuses on supply factors. A fuller account should also consider demand factors, but these are difficult to capture with the kind of information on which this article is based. Consequently, the article establishes foundations for further research.
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