Back in June, Phil Soos from LF Economics released data showing that Australia had overtaken Switzerland and Denmark to become the most indebted household sector in the world:
And despite record low mortgage rates, Australia’s mortgage slaves are still sacrificing a higher share of their income to pay mortgage interest (let alone principal) than when mortgage rates peaked in 1989-90:
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Now, the Bank for International Settlements (BIS) has released calculated debt service ratios (DSR’s) for households and non-financial companies using data from countries national accounts, which has found that Australian households have the third highest, and rising debt service ratio, when compared to a wide range of advanced western economies. Here is the chart and analysis from Martin North:
Australia is near the top of the DSR scores at 15.1, well behind Netherlands and just below Norway. Many other advanced economies are much lower. However, we also see a different trajectory in Australia, with stronger growth here, compared with a static or falling pattern elsewhere.
This is further evidence of the household debt problem here. Of course we had cash rate cuts later in the year, but debt has continued to rise, and our estimate is average household DSR currently sits around 16. If we are right, the rising trajectory has continued.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
