Australia’s Household Debt Crisis Looms

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Australia’s Household Debt Crisis Looms


Today in the news, former economics advisor John Adams advised that Australia is too late to avoid an ‘economic apocalypse’ even after his repetitive warnings to the political elites in Canberra. He continued to insist the Reserve Bank to raise interest rates to stop household debt getting further out of hand.

This bubble is easy to spell out. Confidence! It’s the misconstrued perception that Australia’s last twenty years of sustained economic growth will never encounter any kind of correction is most troubling. Australia survived the GFC and a mining boom and bust. In the meantime, Melbourne and Sydney house prices have not skipped a beat or taken a backward step. Regretfully, the decision makers and powerful elite in this country live in these two cities, and see Australia’s economic problems through a completely different lens to the remainder of the country. It’s a two-speed economy spiralling uncontrollably.

I accept that this emerging crisis isn’t just as straightforward as house prices in our two biggest cities, however the median house prices in these cities are ever rising and contribute greatly to overall household debt. The specialists in Canberra understand that there’s an enflamed house market but seem to be detested to take on any severe measures to correct it for fear of a house crash.

As far as the remainder of the country goes, they have a totally different set of economic prerogatives. For Western Australia and Queensland especially, the mining bust has sent real estate prices tumbling downwards for years now.

One of the indicators that confirm the household debt crisis we are beginning to see is the increase in the bankruptcy numbers throughout the entire country, particularly in the March 2017 quarter.


In the insolvency sector, we are witnessing the incapacitating effects of house prices going backwards. Though it is not the predominant cause of personal bankruptcies, it definitely is a critical factor.

House prices going backwards is just part of the problem; the other thing is owning a home in Australia enables lenders to put you in a very different space as far as borrowing capacity. Put simply, you can borrow much more if you are a home owner than if you are not a home owner. I bankrupt people everyday and the extent of debt varies considerably from the non-home owner to the home owner. Lending is based on algorithms and risk, so I suppose if you own a home you’re more likely to have steady income and less likely to end up bankrupt, so subsequently you can borrow more. If you own a home in Melbourne or Sydney, you’re a safer risk than if you own a home in Mackay, simply because in one area the median house prices are booming and the other is going backwards, as it’s been doing so for years.

In conclusion, it appears we are running into a wall at full speed, and there are few people suggesting we slow down. If you wish to know more about the looming household debt crisis then call us here at Bankruptcy Experts Mildura on 1300 795 575 or visit our website for additional information:

By |2018-07-26T03:01:33+00:00September 14th, 2017|Articles, bankruptcy, blog|0 Comments

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