• 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.

 

 /></p>
<p> </p>
<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.

SHARE
Back to Insights and News

Related articles

All insights

Australian SMEs grapple with rising defaults amid cost pressures

The rising cost of borrowing and reduced consumer demand are hitting small and medium-sized enterprises (SMEs) hard. Payment defaults among them have surged to a record high, making them more vulnerable to business failure. According to the latest CreditorWatch Business Risk Index (BRI), business-to-business trade payment defaults are now above pre-COVID levels and rose by…
Read More

Chinese investors maintain dominance in Australia’s housing market

Chinese investors remain prominent in the Australian property sector, maintaining their position as the largest foreign buyers of real estate. After spending $3.4 billion on approved residential property purchases in 2022–23, they are continuing to actively invest in the market. The latest data from the Foreign Investment Review Board (FIRB) shows that home buyers from…
Read More

Navigating this year’s economic challenges

Australia faces economic headwinds from internal and external factors, with growth expected to slow down as challenges weigh on consumer demand. For small and mid-size enterprises (SMEs), adaptability is now more crucial than ever to navigate the uncertainties ahead. So what key trends should SMEs anticipate and proactively address this year?   Sustained inflation Inflation is…
Read More