2010 was certainly a tough year with the number of consumers in arrears increasing to over 11 million and thousands of people losing jobs or getting reduced commissions. The silver lining was that interest rates were cut several times, meaning consumers with homeloans and vehicle finance, in particular found their repayment being reduced and helping the household cashflow.
With 2011 upon us, many are asking what is in store and is it likely to be good, bad or even uglier. The good I expect to see is that interest rates will come down by around 1%, maybe a little more which will help those consumers struggling to keep their homes and vehicles especially. This reduction will hopefully have a positive effect on businesses and mean our national growth rate can improve producing more jobs that are desperately needed. The government has a target of 5 million jobs in the next 10 years and therefore 500,000 new jobs need to be created each year.
I am afraid 2011 will still have plenty of bad news I expect, as more consumers look for debt management services due to the high debt levels within the average household. Currently 78% of household disposable income is used to service debt and this is far too high considering our interest rates are at such low levels. If household debt is not brought under control now, then once rates start ticking upwards, we are going to be in a severe situation, potentially worse than now. Households must start concentrating on their budget as with several expenses such as rates and electricity increasing much faster than wage inflation, plus the introduction of NHI expected in 2012, budgets are going to come under strain. I expect employment to increase, but slowly and certainly not near the levels required to replace the 1 million jobs lost over 2009-2010.
I sincerely hope that 2011 does not get any uglier than the last couple of years, however there is still much uncertainty globally, with many developed countries with large debts and the potential to default on their debt repayments. If this was to happen, then we could be plunged back into a global recession, which would have an effect on the South African economy and job creation.