Household debt could bury economy
Australia's level of household debt has not received nearly as much scrutiny as public debt and it should, a Deloitte economist believes.
Deloitte Access Economics partner, David Rumbens, said in a briefing that while economic growth had been supported by the Government piling into debt, it would be household debt that would bury the country.
"In 2015 Australian household debt reached more than 120 per cent of GDP [gross domestic product]. This means average annual growth in the value of debt of 10 per cent per year since 2000, bringing Australia's household debt to just over $2 trillion at the end of 2015," Rumbens said.
He said much of the increase in household debt had been driven by growth in house prices, which over the recent years had been increasingly detached from national income.
"That is, the level of debt has followed the value of the asset, rather than the ability to repay the debt," Rumbens said.
"As household debt rises further away from our output or incomes, it presents a significant risk to Australia's economic future."
Rumbens noted that while there had been an increasing amount of scrutiny and concern about the sustainability of the growing Government deficit since 2009, household debt had not received nearly as much attention.
"Of the 44 countries reported on by the Bank for International Settlements, Australia is unfortunately a world leader," he said.
"We have the highest ratio of household debt to GDP of all, and we are one of just four countries where household debt exceeds 100 per cent of GDP."
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