Australia takes silver in global household debt

By Leith van Onselen

After pinching bronze last quarter and taking the mantle of the world’s third most indebted households, Australia has risen to second place according to the latest data from the Bank for International Settlements (BIS).

The next table shows the ratios of household debt to GDP as at the September quarter of 2016. As you can see, Switzerland (128%) has taken gold with Australia (123%) taking silver and Denmark (121%) bronze. The Netherlands (111%) and Norway (101%) round out the top five:

ScreenHunter_17810 Mar. 07 08.38

The below chart tracks these ratios across the Anglosphere, with Australia way out in front of the other English-speaking nations with a ratio that is also well above Ireland’s at its peak (117.5%):

ScreenHunter_17811 Mar. 07 08.40

The BIS has also released data on household debt servicing ratios (DSR), which estimate aggregate principal and interest repayments to income. These are considered “a reliable early warning indicator for systemic banking crises”, whereby “a high DSR has a strong negative impact on consumption and investment”.

The below table shows that Australia had the third highest DSR out of the 17 countries sampled:

ScreenHunter_17815 Mar. 07 09.04

Moreover, Australia’s DSR is way higher than the other Anglosphere nation’s sampled:

ScreenHunter_17813 Mar. 07 08.57

Together, this data shows conclusively that RBA assistant governor Luci Ellis’ claim last month that “similar comparisons of household debt-to-income ratios across countries also put Australia in the middle of the pack” is not even in the ball park.

Australia is at the very top of most indebted households in the world.

Now get back to paying-off that mega-mortgage!

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