Consumers comfortably in debt
The average Australian household now spends 2.3 per cent more each week than it receives in income, according to the latest AMP/Natsem Income and Wealth Report.
This compares with an average Australian household savings ratio (net saving to disposable income) of more than 10 per cent in the 1970s, the report said.
It found Australian households owed a combined $431 billion in 2002, representing 60 per cent of all economic activity. The total debt of the average household is about 1.3 its average income after paying income tax.
About $279 billion of the total household debt in 2002 was outstanding on home mortgages and $85.4 billion on other property loans. Personal loans accounted for $49 billion, credit card debt for 7.3 billion, and HECS debt for $9.1 billion.
The report also revealed that most households were able to cope with the debt and are managing their debt responsibly.
AMP Financial Services managing director Craig Dunn said most households “should be able to cope” with their debt at current levels, as long as sickness or unemployment doesn’t strike.
Dunn cautioned, however, that debt management is “still very much a careful balancing act for most for the average households and resources are often stretched to the limit.
“The report also raises the question whether Australian families are over-investing in their homes and other residential property,” he said.
National Centre for Social and Economic Modelling (NATSEM) director Professor Ann Harding said that while 64.5 per cent of households have some form of debt, it is not spread evenly across the population.
Harding, who is also a co-author of the report, said the analysis revealed those households with the highest debt are in general those best placed to service it.
She said high-income households were found to have much higher debt levels in general than low income households.
“Households with total income exceeding $100,000 a year had an average debt of $143,000, compared to an average debt of only $9,700 for households with incomes up to $20,000 a year.”
She said households headed by 35 to 44-year-olds were found to have the highest level of debt at just $95,000, as they make the transition to home ownership.
By contrast, Harding said, the average level of debt of households headed by people aged 65 and over is only $5,600 a year.
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