MANY already over-indebted consumers could fall even deeper into debt due to looming interest rate hikes and increases in the prices of fuel and electricity tariffs‚ Neil Roets, chief executive of debt management company Debt Rescue, said yesterday.
Extremely high levels of debt limit the extent of growth in consumer spending. The fuel price increased by 47c/litre at midnight last night‚ while electricity tariffs will rise further next month by an amount yet to be determined by the energy regulator.
Interest rates are likely to rise before the end of the year.
“The 49c a litre increase in the diesel price is going to impact directly on the prices of essential commodities like food, which in turn is going to hit the poorest of the poor the hardest‚” Roets said.
Independent economist Dawie Roodt said the price hikes in fuel and electricity would place consumers in a situation where they would no longer be able to spend the funds needed to boost growth.
“This, in turn, will impact on unemployment because without substantial growth‚ unemployment is simply going to keep rising and drive more consumers ever deeper into debt‚” Roodt said.
Unemployment rose to 26% in the first quarter from 24% in the previous quarter.
The ratio of debt to disposable income stood at 77.6% in the fourth quarter of last year‚ indicating that households had too much debt for the kinds of income they received.