The media buzz around debt in Australia has increased significantly. Most of the attention in the parliament and in the media seems to be focused on government debt. However, there is one sector of the national economy that has been largely ignored: Australian household debt.
It is not just the government that has been accumulating debt over the years. Australian household debt has also increased at an alarming rate over the last few years. In the past 25 years household prices have gone up, household incomes have risen and housing interest rates have decreased, but household debt has also continued to accumulate.
Details about Australian Household Debt
At the end of 2013, Australian household debt stood at a whopping 1.84 trillion dollars. According to the numbers, on average each person in Australia has a debt of just under $80,000 at any given time. Even after adjusting the inflation, the household debt value has been the highest it has been in the past 25 years. With this being said, the growth rate of real Australian household debt per person has reduced since the onset of the financial crises that struck on a global scale in 2007.
From 2001 to 2007, Australian household debt increased by 10 percent every year. However, between 2007 and 2013, the rate of increase lowered considerably to 2 percent per year. This decrease can be attributed to mortgage lending standards becoming stricter in 2008.
Another troubling fact is that Australian household debt has increased at a rate twice of that of household assets. When expressed in a percentage against household asset, Australian household debt shot up to 21 percent in 2011, where as it was only 11 percent in 1988. However, this rate has decreased to 20 percent as of 2013.
Australian household debt has increased much quicker than household income over the last 25 years. The household income depicts the ability of the family or household to be able to make loan repayments. This means that an average household in Australia owed about 1.8 times more than the disposable income that it earned.
Australian Household Debt Compared to Other Countries
The amount of household debt is not only surprising in the context of Australian economic history, but is also startlingly high when compared to the household debt values of other developed G7 countries. In 2012, the household debt in Germany and Italy was less than the gross disposable income of households, unlike in Australia.