Youth Debt



About this Item
SubjectsYouth; Children; Loans; Credit; Consumer Affairs; Telecommunications; Debts
SpeakersD'Amore Ms Angela; Hazzard Mr Brad; Acting-Speaker (Ms Marianne Saliba); Keneally Ms Kristina; Roberts Mr Anthony
BusinessMatter of Public Importance


    YOUTH DEBT
Page: 4218


    Matter of Public Importance

    Ms ANGELA D'AMORE (Drummoyne) [4.27 p.m.]: I ask the House to note as a matter of public importance youth debt in New South Wales. I welcome the opportunity to present this matter to the House today. It is important because a new generation of young people are beginning their lives with debt hanging around their necks—debt that can begin to accumulate when they are very young. In our magazines, on the Internet, in movies and on television the message to young people is buy, buy, buy. A couple of weeks ago I noticed an interesting article in the Sunday Telegraph about the growing phenomenon of tweenage girls, that is, girls aged between eight and 14. The article stated:

    It's tempting to dismiss tweens as giggling schoolgirls with little on their minds but Barbies and ponies, but marketing gurus around the world have identified them as a consumer powerhouse with leverage over billions of consumer dollars.

    The article further stated:

    The movie and music industries have been quick on the uptake, popping out a new breed of tween queen, carefully moulded to target schoolgirls into a merchandising bonanza; you've seen the movie, now buy the CD, the clothes, the cosmetics and the personalised credit card.

    The article notes that although the social term "tween" has been around since the 1960s, it appears that only recently the 8-year-old to 14-year-old female demographic has begun to wield enormous consumer power, particularly because of the influence they exert on their parents' buying choices. This phenomenon seems to know no bounds. The latest tween superstar is singer-actress Hilary Duff. In the United States Visa has just introduced the Hilary Duff card that enables parents to prepay an amount they deem appropriate for their daughters to spend before handing over the credit card. Credit card debt, personal loans to buy cars, higher education contributory scheme fees and holiday debt are real problems for young people.

    Earlier this year the Minister for Fair Trading raised a new potentially harmful debt trap: M Commerce. She successfully put M Commerce, young people and debt generally high on the agenda when she chaired the August Ministerial Council on Consumer Affairs in Sydney. M Commerce, or the new electronic wallet, capitalises on the popularity of mobile phones. It enables consumers to make purchases of a variety of goods and services direct from their mobile phones and to be billed later. When one considers that 300 million text messages are sent by 11.5 million Australian mobile phone users each month, this area of commerce will need close attention to ensure that consumers are protected.

    Companies in Australia such as Telstra are already offering consumers the opportunity to use their mobile phones to pay for a coke at a railway station vending machine, taxi services, groceries and movie tickets. The increasing level of debt is a growing concern for all Australians. Over the past 10 years household debt has increased at an average annual rate of 14 per cent, with the household debt to income ratio rising from 56 per cent to 125 per cent. The total debt owed by Australian households has more than trebled to $530 billion. However, when debt starts at the age of 14, 16 or 17 years of age, largely due to the availability of new technology, marketing techniques and lifestyle pressures, it can be a serious problem for young people and their families.

    Recent research indicates that while most Australians have a relatively good understanding of basic financial matters, young people stand out as lacking certain key financial skills. When this is combined with a lack of experience due to age and low income, young people are vulnerable to getting into trouble with debt. While debt levels can vary from several hundred dollars to thousands of dollars, the ramifications are grave. They include having to pay off debt in small instalments over a long time, bad credit ratings that can affect future applications for loans and, ultimately, bankruptcy. If that is on top of family and social pressures, it can lead to further money problems.

    One advantage when considering education and information strategies for young people is that they are still, in most instances, able to be reached as a group. This stage of the life cycle of this vulnerable group offers an opportunity to provide them with information, education and personal resources to become informed consumers for life. The New South Wales Office of Fair Trading has undertaken cutting-edge work on financial literacy for young people through the development of the Money Stuff Program. That program is an educational resource designed to assist young people from 16 to 24 years of age to deal with consumer responsibility and personal financial management. Money Stuff consists of a web site, a video and a set of three teacher books in the subject areas of commerce, mathematics and English. It is designed to be used in the classroom by teachers and students and anyone with access to the Internet. The Money Stuff resources are free to all high schools.

    The Money Stuff Program challenges students to complete three real-life scenarios. Through those scenarios, students experience the process of buying a used car, buying a mobile phone and renting a shared house. The challenge introduces information in two ways: through information pages and case studies. Money Stuff formed the basis for the highly successful Consumer Youth Award, one of the categories of the 2002 Consumer Protection Awards. Money Stuff has received excellent teacher and student feedback. It has also won numerous national and international awards. Most importantly, the web site, which is designed with young people in mind, has recorded close to 1.8 million hits since it was established. We need to equip young people with the necessary tools and, most importantly, the knowledge to avoid debt traps and to be savvy enough to recognise when they are being sucked into a slick marketing campaign that can lead to heartache at the end of the credit card statement.

    Mr BRAD HAZZARD (Wakehurst) [4.35 p.m.]: Listening to the honourable member for Drummoyne reminded me just how many Labor members are out of touch with what is going on in the real world. The honourable member for Drummoyne may be considered one of the younger members of Parliament but she needs to speak to young people to find out the issues facing many of them. There are many serious issues relating to the level of debt accumulated by young people, but we have to distinguish between young people under the age of 18 and young people over the age of 18. There is a technical legal definition, but when talking about youth and young people in this debate we are talking about those who cross the boundaries. Obviously, serious issues are involved when companies take advantage of young people under the age of 18 who technically ought not to have the legal capacity to enter binding contracts and, therefore, to have any liability accrued against them. However, from time to time members of Parliament hear of companies that in one way or another manage to get young people to enter some kind of contract, and those young people believe they are legally liable to meet their debts.

    The bigger issue is where young people are so preoccupied. These days any young person who does not have a mobile thumb that works amazing tricks on a mobile phone sending SMS messages is a rarity. These days most young people, by fair means or foul, secure some sort of access to a mobile phone as soon as they possibly can. Unfortunately, some rush into contracts that can result in huge debts being run up. I know young people who have ended up in that position. Major corporations have a role to play in providing guidance to young people. When young people enter contracts there should be some moral or ethical responsibility on companies to ensure that those young people get more than just the normal information that might be provided to a person who is legally responsible, that is, someone over the age of 18 years. There is a twilight zone surrounding young people between the ages of 18 and 21 or 22, and companies should feel morally bound to take further steps than they otherwise would to ensure that those young people know about the obligations they might be taking on.

    Why do young people get to the point where, at about the age of 18, they do not know their legal responsibilities? Sadly, it is because the education system in New South Wales, particularly under the Government, has missed its real focus. The honourable member for Drummoyne talked about yet another new program for young people called Money Stuff. The Government has had 10 years to address these issues and in that time there has been a boom in the use of mobile phones. A decade after the Government came to office thousands of young people have found themselves legally obligated to pay large amounts of money, and the Government has failed to address those problems during the educational or formative years of those students.

    Within the legion of students who pass through our schools there is a group that the Government, and the Premier personally, should feel responsible for. I refer to the approximately 8,000 to 9,000 young people—the number was 5,500 when the Government came to office—who are in foster care. It is opportune that the New South Wales Commission for Children and Young People has published an article in its spring 2003 edition of "Exchange" about the disadvantages suffered by children in foster care. I spoke about this issue many times when I was the shadow Minister for Community Services. At every opportunity I pointed out the profound failure by the Government to provide young people in care with the educational continuum they need to gain appropriate life skills. I admit that this issue was not well addressed by previous governments either, but the number of young people in care has dramatically increased while this Government has been in power, and that makes the problem even greater. Young people need to learn life skills about handling the various expenses and debts that one incurs throughout one's life. The article in the "Exchange" states:

    It is estimated that the cost to Australia of young people in out of home care leaving school before they have attained an adequate level of education is $2.6 billion.

    This is an article by the Carr Government's Commission for Children and Young People.

    Mr Anthony Roberts: They have 'fessed up.

    Mr BRAD HAZZARD: They have 'fessed up. But, more importantly, the Premier needs to 'fess up and act on this serious issue. The article continues:

    While this is a huge cost in financial terms, an even greater cost to our society is its "failure to tap into the enormous talent and potential of these children", said the Manager of UnitingCare Burnside's Education Program in Western Sydney, Yvonne Clark.

    "Not meeting the educational needs of children in out of home care is likely to have a major impact on their professional and other life goals and the flow on effect this has to the broader community," said Ms Clark.

    "One of the things contributing to this situation has been a general community misconception that the majority of these kids have inherited more than just social disadvantages and that they probably wouldn't have had the background and ability to do well academically, even if they were still with their families," she said.

    It is hypocritical of the Carr Government to launch into this matter of public of importance without referring to the 8,500 young people who are under the Government's care. As these children are brought into care the Premier, in effect, is acting as their father, in loco parentis. It is diabolical that in 2003 so many of these young people are faced with major obstacles to obtaining a reasonable education. Sadly, children in foster care frequently move from one school to another. On numerous occasions the Liberal Party and The Nationals have raised the issue of ensuring that as these children and young people move from school to school their educational assessments are transferred with them.

    Often the Department of Community Services caseworkers—who are distressed and under pressure, despite the Government's rhetoric—do not transfer the files from one school to another. Repeatedly these young students are not provided with the continuum of the educational outcomes and opportunities they require. Further, when they leave home care their files, including any record of their educational outcomes, often disappear. Again, this is because of a lack of support from the Carr Government to the children in foster care, and particularly to the Department of Community Services, to make sure that these young people get the continuum of education they require.

    Ms Kristina Keneally: Point of order: My point of order relates to relevance. The honourable member for Wakehurst is not speaking to the issue, which is about young people and debts. He has veered to another topic.

    Madam ACTING-SPEAKER (Ms Saliba): Order! The honourable member for Wakehurst should confine his remarks to the question before the Chair.

    Mr BRAD HAZZARD: That is the silliest point of order a member has taken for a while. The honourable member for Heffron can do better than that. I am talking about youth debt and the lack of preparedness through education to address debt. They are the precise issues that Ms D'Amore spoke about in her matter of public importance.

    Ms Angela D'Amore: You can call me the member for Drummoyne.

    Mr BRAD HAZZARD: You can call me whatever you like. The issue is about a failure to properly educate children, to give them the proper educational opportunities. If nothing else, the Government should get it right when providing opportunities for the children for whom it takes legal responsibility. Effectively, the Government acts in loco parentis when it takes children from their natural parents, often for very good reason.

    Ms Kristina Keneally: Point of order: My point of order again relates to relevance. I ask that the honourable member for Wakehurst be brought back to the issue, which is about young people and debt.

    Madam ACTING-SPEAKER: Order! I again remind the honourable member for Wakehurst to keep his remarks relevant to the matter of public importance.

    Mr BRAD HAZZARD: It is pathetic that the honourable member for Heffron and the honourable member for Drummoyne do not want to hear about the failure of their Government on the issue of children in care. I hope that over the next few years they take a more mature approach and ensure that these children get a fair hearing. They are trying to stop this House from hearing about the problems of children in foster care and the lack of educational opportunities provided by their Government.

    Ms KRISTINA KENEALLY (Heffron) [4.45 p.m.]: I welcome the opportunity to join the honourable member for Drummoyne to talk about this important issue. I represent an electorate where many young people reside, particularly university students who study at the University of New South Wales. Debt is a real problem for them as they struggle through their studies or embark on their first job. Many are living away from home for the first time, and they have to learn how to survive on a tight budget. Last week I joined the Minister for Fair Trading in Alexandria to promote a debt-free Christmas. With Christmas only weeks away it is important that consumers, particularly young consumers, avoid getting in over their heads with credit cards and know their rights when it comes to refunds, lay-bys and warranties of products.

    One growing area, which the honourable member for Drummoyne highlighted, is the proliferation of mobile phones. There are a number of pitfalls for young people, including pressure selling and marketing techniques, signing inappropriate or unfair long-term contracts, unexpectedly high phone bills, and the ramifications of getting into debt, for example, a bad credit rating for future loans. The New South Wales Office of Fair Trading has received almost 700 complaints about mobile phones in the past 12 months. The complaints range from defective goods and misrepresentation to misleading conduct. Charges have flowed from these complaints. The statistics do not reveal the proportion of complaints that involve young people. The important message is for young people to read the terms and conditions of the contract they are entering into rather than be dazzled by the marketing ploys of a zero purchase price. A Government facts sheet entitled "Buying a mobile phone" has some good tips on how consumers can protect themselves from mobile phone debt.

    Credit is probably the most dangerous area of youth debt because it provides instant security through access to cash. Further, it is a status symbol. Credit over-commitment has become a significant problem for many vulnerable Australian consumers, particularly young people. Problems include paying high interest rates on credit cards in comparison with most personal loans, spending money that does not exist, and using one credit card to pay off another credit card. In fact, annual credit card data from the Australian Credit Cards Report dated March 2003 shows that Australians put almost $100 billion on credit. That is an increase of more than 16 per cent on the previous year. An average credit card account had a balance of $2,000 and an annual expenditure of $11,000.

    This data shows a considerable increase in credit card purchases over the past 12 months to March 2003. It also shows a rise in cash advances, which attract interest from the day of withdrawal. Given the high interest rates associated with credit cards, this is a very expensive option for cash. Anecdotal evidence from financial counsellors and legal centres suggests that young people are particularly vulnerable to credit card debt because they do not have the finances to back up their expenditure. Young people are also particularly prone to unexpectedly high mobile phone bills.

    Financial counsellors and consumer organisations are reporting that young people use their credit cards to pay their mobile phone bills and use multiple credit cards to juggle their debts. Improving young people's financial literacy is central to providing them with the information, skills and confidence to be smart consumers for life. This is best done through developing resources that are compatible with the school curriculum. The New South Wales Government supports a national project by the Australian Investments and Securities Commission called Financial Literacy in Schools. Financial literacy for young people will be specifically promoted as part of the 2003 New South Wales Consumer Protection Awards being held next month.

    Another area of concern is relationship debt; that is, when someone becomes involved in another person's debt because of an emotional attachment. It is more likely that women will be burdened with this unwanted debt. The relationship may end, but the debt continues. The Office of Fair Trading has produced a fact sheet dealing with this problem. This is particularly important because, as we heard from the honourable member for Drummoyne, young women are prone to fall into debt. Young people need to be aware of what they are getting into before signing up to a new credit card or a new upgraded mobile telephone, or entering into a debt with a partner. It is a tragedy for young people to begin their lives with a debt burden around their neck.

    Mr ANTHONY ROBERTS (Lane Cove) [4.50 p.m.]: Like my colleagues, I am concerned about youth debt in New South Wales and the encouragement offered to young people to take on large debts. We live in a time of high-pressure advertising and hard sell, whether it be from car salesmen or magazines. Computers are advertised, particularly to university students, offering a package that allows immediate delivery and a repayment plan. However, students often find that they cannot afford the repayments and ridiculous interest rates. Young people may feel they need to drive the latest and greatest car rather than borrow their parents' car or buy an old jalopy. They are lured into saleyards by slick salesmen who sign them up on finance plans that they find they cannot afford. Mobile telephones are also a major problem with payment plans on the never-never. Young women, and more recently young men, succumb to high-pressure advertising on television and in youth magazines to purchase designer clothes at inflated prices, often on their credit cards. Credit cards cause problems when banks repeatedly offer to increase credit limits.

    Mr Gerard Martin: Point of order: The Opposition is not allowed a second speaker in a matter of public importance debate. It is nothing personal; I am sure it would have been a wonderful contribution.

    Madam ACTING-SPEAKER (Ms Saliba): Order! The standing orders provide that, after debate on an urgent motion, in debate on a matter of public importance there shall be two speakers for 10 minutes, one speaker for five minutes and the member who initiated the matter may then speak in reply for five minutes. The honourable member for Drummoyne and the honourable member for Wakehurst were allowed 10 minutes and the honourable member for Heffron was allowed five minutes. I uphold the point of order.

    Mr ANTHONY ROBERTS: I will move to suspend standing orders.

    Mr Brad Hazzard: Point of order: Obviously this is an issue that concerns everyone and it will not lead to a division. If there has been a mistake, it is the Chair's mistake. The honourable member is already two minutes into his speech. In those circumstances, I ask that the standing orders be suspended to allow the honourable member to finish his contribution.

    Madam ACTING-SPEAKER (Ms Saliba): Order! I have upheld the point of order taken by the honourable member for Bathurst. I call the honourable member for Drummoyne in reply.

    Mr Brad Hazzard: The honourable member was halfway through his speech. What will happen to the contribution he has already put on the record?

    Madam ACTING-SPEAKER (Ms Saliba): Order! The honourable member for Wakehurst will resume his seat. What is on the record cannot be removed.

    Ms ANGELA D'AMORE (Drummoyne) [4.54 p.m.], in reply: I will address some of the concerns raised by the honourable member for Wakehurst. The Carr Government has a good track record in looking after young families and young people. It has committed an extra $1.2 billion over the next five years to help vulnerable families and young people. The Opposition would have cut $700 million from the budget, and it announced its intention in a sneaky way two days before the last election. It has no credibility on the issue.

    Mr Brad Hazzard: Point of order: This is precisely the point of order that you, Madam Acting-Speaker, supported when it was raised by honourable members opposite. When I indicated I was talking about children, foster care and the Department of Community Services, you ruled me out of order.

    Madam ACTING-SPEAKER (Ms Saliba): Order! The honourable member for Drummoyne will confine her remarks to the question before the Chair.

    Mr Brad Hazzard: Behave yourself if you are going to take points of order against me!

    Ms ANGELA D'AMORE: The honourable member should be patronising elsewhere. I thank honourable members for their contributions to this important debate, especially the honourable member for Heffron. Recently I highlighted this issue in my local area with regard to motor vehicle dealers. I joined the Minister for Fair Trading on Parramatta Road to launch a new booklet that provides consumers with valuable car-buying tips.

    Mr John Turner: Point of order—

    Madam ACTING-SPEAKER (Ms Saliba): Order! If the honourable member for Myall Lakes continues to interrupt the honourable member for Drummoyne, I will rule him out of order.

    Mr John Turner: I have not raised a point of order previously. You cannot rule me out of order until I have spoken. The standing orders clearly provide that the honourable member speaking in reply must address the issues raised in the debate and not introduce new material. The honourable member is introducing material about standing on Parramatta Road with a book or something else. That is not relevant and it has not been raised previously in this debate. She must reply to the issues that have been raised.

    Madam ACTING-SPEAKER (Ms Saliba): Order! The honourable member for Drummoyne is talking about people and debt. That is the subject of the matter of public importance.

    Ms ANGELA D'AMORE: Last Friday the Minister launched the REVVED UP program for senior school students at Bonnyrigg High School. The program will be rolled out to other schools from next year. The main message is: Don't let your heart rule your head when it comes to selecting a car. The car buyers' handbook and the REVVED UP Program look at the pros and cons of buying cars through licensed motor dealers, at auctions and in private sales, which is a very important issue to our youth. Financial arrangements, contractual obligations, warranties and the need for vehicle inspections are also covered.

    Another phenomenon that is enticing young people to reach for their credit cards is Internet shopping. With more and more young people using computers for university studies and other pursuits, the temptation to buy over the Internet is all too real. However, that involves risks such as goods advertised not really being for sale, hidden costs after shipping and handling, and giving bank details to people who are not legitimate traders. These are all concerns and, again, the message is clear: Young people need to be aware of their rights as well as how to arm themselves against the tactics of marketing gurus. Consumer Week, which will be held late next month, is another good opportunity for young people to get involved. The Government wants their feedback on what other debt issues may be affecting them. Some feel too embarrassed to call the Office of Fair Trading or to speak to their parents because it could be seen as a slight on their character if they have slipped into the debt trap or have been taken in by a clever marketing ploy.

    The State has 44 counselling services that provide important information, guidance and assistance to consumers. The Carr Government has allocated a record $1.8 million to assist these organisations to carry out this valuable service, particularly for young people. Young people may be more inclined to talk to a sympathetic stranger than to raise an issue at the family dining room table. Young people experience many pressures—to look certain ways, to achieve high marks, to get into a good career and to start a family—and it is unfortunate that they also have to worry about whether they are falling into a debt trap from which they cannot escape.

    Discussion concluded.