There are signs that consumer borrowing is rising in response to better economic conditions.

Of course, too much debt can be a bad thing, as the global finance crisis reminded us all.

But a willingness to take on debt can be an important indicator for the strength of the spending that drives the economy along, generating jobs and bringing unemployment down.

The latest credit card statistics from the Reserve Bank of Australia (RBA), released on Friday, are tentatively good news in that regard.

Total credit and charge card balances outstanding declined by 1.6 per cent to $46.152 billion in January from $46.912 billion in December.

But these figures are not seasonally adjusted – a fall is normal in January after the pre-Christmas spending binge in December has wound down.

In fact the average change in the previous five Januaries was 1.8 per cent, so in that respect January was “normal”.

And it followed a better six months.

The trend in retail sales picked up in the latter half of the year after stalling earlier in 2009 after the cash handouts to households were finally spent.

Card-based debt has picked up in tandem.

In the year to January growth in card credit debt outstanding was five per cent.

It was a relatively slow rate by the gauge of previous five years, when the average increase was 11 per cent, but it still marked a recovery from the annual pace of less than two per cent recorded six months earlier.

It showed household spending, driven by strong employment growth and high levels of consumer confidence, has momentum of its own despite the withdrawal of the payments used to cushion the worst of the blow from offshore.

There is no sign that households have thrown caution to the winds and are plunging merrily into deep debt, though.

Growth in the value of purchases using credit and charge cards remains well under recent norms, at 4.4 per cent in the past year, versus 8.5 per cent on average over the previous five.

And cash advances using credit cards fell by 12.8 per cent between this January and the last, compared with increases averaging 2.8 per cent between January 2004 and January 2009.

It looks very much like the kind of not-too-hot, not-too-cold growth in household demand that central bankers like to see.

With an business investment boom on the near horizon, the last thing the Reserve Bank of Australia (RBA) would want to see is a spending frenzy in the household sector as well.

As they stand, the credit figures are strong enough to be taken as evidence that the household sector would not wilt if the central bank took interest rates up another notch.
If it were much faster, the growth in card credit would indicate a rate rise was not just bearable but urgently necessary.

AAP