Australia to spend $8.8 billion on Christmas presents, more than half on credit

It’s beginning to feel a lot like the most expensive time of year.

Australian shoppers will spend more than $48.1 billion in retail stores over the Christmas trading period, including more than $19 billion on food alone.

On presents, Australians are expected to spend $8.8 billion, more than half of which will be spent on credit or store cards, according to a survey by peer-to-peer lender Society One.

“Our research says our customers think they will repay their Christmas debt within three months…but the reality is they are unlikely to. We all have a bit of revolving debt,” said Greg Symons,  co-founder and chief operating officer of peer-to-peer lender SocietyOne.

The Christmas spending survey found that the biggest spenders this festive season will be in NSW, where shoppers will part with $2.9 billion.

In a close second, Victorians are expected to spend $2.3 billion this Christmas, followed by Queensland ($1.7 billion), Western Australia ($1 billion) and South Australia ($615 million).

Almost all the residents of states that were surveyed will use credit to make more than half of their present purchases.

Current estimates from the Australian Securities and Investment Commission show Australians owe about $32 billion on credit cards, an average of about $4,300 per card holder.

The average card holder pays around $700 in interest a year, with an interest rate between 15 to 20 per cent.

“We know Christmas is a time when we are going to spend more than normal and we end up paying high interest on a credit card because we have a balance outstanding after Christmas and New Year,” Mr Symons said.

“A credit card is the simplest and easiest way to sort your credit needs out over Christmas. And while we don’t disagree with that…there are much better products in the market where you can get a better rate.”

As a peer-to-peer lender, SocietyOne operates as an auction site for potential lenders and borrowers who bid an amount and an interest rate.

Savers are estimated to earn almost 10 per cent a year by lending online through such platforms, while borrowers benefit too, by borrowing at a lower rate than the bank.

While many consumers will use loans and credit to get by this season, online marketplace Gumtree estimates Australians could save up to $250 per household by shopping second-hand this Christmas.

A recent survey conducted by Gumtree found 42 per cent of people in NSW would consider buying a second hand gift for a parent, while more than half would be happy to receive a second hand item as a present.

In their latest Christmas spending figures, the Australian Retailers Association and Roy Morgan Research forecast Australians to spend 2.3 per cent more at retail stores, compared to last year.

“We know clothing, accessories and footwear have been strong in recent months, and I expect this to continue as Christmas is just the time to gift that new bag or pair of shoes,” said ARA executive director Russell Zimmerman.

“I’ve been talking to retailers and they have been telling me of a very strong opening to business this Christmas period, particularly in the fashion industry, and it’s because of the warm weather.”

The research also shows that spending during the festive season will vary across the nation, ranging between $500 and $650 per person for Christmas gifts alone.

According to the Commonwealth Bank, four years ago, the average Australian spent $475 on Christmas presents. This year the bank forecasts Australians will each spend on average $599, while women will account for the majority of money spent on gifts.

The most popular dates for shopping this season are likely to be Saturday 17 December, followed by Sunday December 18 and Thursday December 22.

This Christmas consumer group Choice has issued advice to Australian shoppers, in order to avoid a “financial hangover” in the new year.

Choice recommends comparing products and prices, avoiding shopping centre traps, acting on refund rights and signing up for free product safety alerts before parting with money this holiday season.