• Australian household debt to income reached a historic level of 177% in April of this year. It is largely the result of Australia’s obsession with owning a home, easy access to debt and low interest rates. This is no small feat, but is nothing much to celebrate. The worrying thing is that the Australian experience stands in contrast with other comparable economies. In short, we are heading in the wrong direction.

 

Australian dream = big mortgage

  • Total household debt stood at $1.84 trillion at the end of 2013. This is the highest level in the last 25 years and is equivalent to $79,000 per person. As the graph below shows the increase has largely come from housing debt, especially since 2002, with other debt such as credit card or car loans only marginally increasing in the mid 2000’s. This debt in and of itself is not a problem. The problem arises when people are unable to repay. A fact the US is still coming to terms with.

 

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<h2>No small feat, nothing much to celebrate</h2>
<ul>
<li>Over the last twenty years, household debt has increased more rapidly than household income. In 1990 household debt to income was 56%, by 2002 it had reached 125%. By April of this year it reached a zenith of 177%. This suggests substantial increases in the stock of debt and unsubstantial increases in income, since 2002 especially.</li>
</ul>
<p> </p>
<p><img decoding=This update does not constitute financial advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek professional advice before acting or relying on any of the content.

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