By Martin North, cross-posted from the Digital Finance Analytics Blog:
New data from the Australian Financial Security Authority shows that in 2016–17, the most common non-business related causes of debtors entering personal insolvencies were:
- excessive use of credit (8,870 debtors)
- unemployment or loss of income (8,035 debtors)
- domestic discord or relationship breakdown (3,222 debtors).
However, employment related issues figured first in WA and SA. Here is an extract from their report:
Non-business related causes of personal insolvencies, 2016–17
While these were the three most common causes of debtors entering non-business related personal insolvencies in every financial year from 2007–08 to 2015–16, excessive use of credit overtook unemployment or loss of income as the single most common cause in 2016–17.
Non-business related debt agreements have increased since 2007–08
The shift towards excessive use of credit is associated with the growing number and proportion of debt agreement personal insolvencies year by year (both at a record level in the June quarter 2017; see personal insolvency statistics and business and non-business statistics for further information). In the period from 2007–08 to 2016–17, debt agreements have increased from 22.9% of non-business related personal insolvencies to 50.1%. In non-business related debt agreements, excessive use of credit has been the most common cause in every year since 2011–12.
Bankruptcies comprised 49.2% of non-business related personal insolvencies in 2016–17, and personal insolvency agreements comprised 0.7%.
The most common non-business related causes of personal insolvencies are similar for all states and territories
In 2016–17, excessive use of credit was the most common non-business case of new personal insolvencies in Australia. This was also the most common cause in 2016–17 in all states and territories except Western Australia, South Australia and Tasmania. Unemployment or loss of income was the most common cause in Western Australia and South Australia. In Tasmania, an equal number of debtors entered into personal insolvencies due to excessive use of credit and unemployment or loss of income. In all cases (as for Australia), the third most common cause was domestic discord or relationship breakdown.
| State or territory | Most common non-business cause | Number of new debtors | % total new debtors in a non-business related personal insolvency |
|---|---|---|---|
| New South Wales | Excessive use of credit | 2,660 | 36.4% |
| Australian Capital Territory | Excessive use of credit | 126 | 37.6% |
| Victoria | Excessive use of credit | 1,696 | 35.5% |
| Queensland | Excessive use of credit | 2,627 | 35.4% |
| South Australia | Unemployment or loss of income | 530 | 33.8% |
| Northern Territory | Excessive use of credit | 104 | 41.3% |
| Western Australia | Unemployment or loss of income | 994 | 35.8% |
| Tasmania | Excessive use of credit / Unemployment or loss of income | 217 | 34.0% |
| Australia** | Excessive use of credit | 8,870 | 35.2% |
*Includes other and unknown state or territory
Most debtors entering non-business related personal insolvencies are male
In 2016–17, 13.3% more men than women entered new non-business related personal insolvencies. This disparity extended across most non-business related causes of personal insolvency. The cause with the highest sex ratio (that is, the ratio of men to women in the debtor population) was gambling or speculation (2.3). More women than men cited ill health and domestic discord or relationship breakdown as causes of new non-business related personal insolvencies (sex ratios of 0.9 and 0.7 respectively).
Non-business related causes by sex, 2016–17*
| Main non-business related cause of personal insolvency | Number of male debtors | Number of female debtors |
|---|---|---|
| Excessive use of credit | 4,566 | 4,299 |
| Unemployment or loss of income | 4,311 | 3,707 |
| Domestic discord or relationship breakdown | 1,376 | 1,843 |
| Ill health | 874 | 950 |
| Gambling or speculation | 363 | 161 |
| Adverse legal action | 238 | 148 |
| Liabilities due to guarantees | 132 | 100 |
| Other non-business reason or unknown | 1,519 | 602 |
| Total | 13,379 | 11,810 |
*Excludes records where debtors did not disclose their sex.
The median age of debtors entering non-business related personal insolvencies varies by cause
In 2016–17, the highest median age of debtors entering new non-business related personal insolvencies was among those who cited the causes adverse legal action and liabilities due to guarantees (both 46 years). Those who cited excessive use of credit had the lowest median age of 36 years. The median age of all new debtors entering non-business related personal insolvencies was 38.
Median age of debtors entering non-business related personal insolvencies in 2016–17 by cause, Australia
| Main non-business related reason for entering a personal insolvency | Median age of new debtors*, 2016–17 (years) |
|---|---|
| Adverse legal action | 46 |
| Liabilities due to guarantees | 46 |
| Ill health | 43 |
| Gambling or speculation | 40 |
| Domestic discord or relationship breakdown | 38 |
| Unemployment or loss of income | 37 |
| Excessive use of credit | 36 |
| Total | 38 |
*Where an age was recorded
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I think it’s just a round about way of saying that these people became insolvent without any external trigger, such as a job loss. They just borrowed money until their arses started bleeding. But I agree with your sentiment – if you never borrow money, you can’t go bankrupt .
Thank you Martin, for this and all the other good work we see here at MB.
I was interested to read here yesterday (comment’s link) that Westpac and to a lesser extent the other big 3 banks finance Chinese buyers of Australian realestate directly in China.
My question is: is this lending included in the APRA investor lending growth quotas?
Here’s the article;
http://www.theaustralian.com.au/business/business-spectator/four-common-misconceptions-about-chinese-property-buyers/news-story/ced248892ae7bd5b772be4de802a2f82
Trend data would be good possible. But a useful snapshot.
http://www.theage.com.au/business/the-economy/debtburdened-households-vulnerable-to-shocks-rba-20170926-gyosyp.html
‘House prices per se isn’t the issue. It’s rather what the house price growth might be reflecting in the behaviours, and introducing risk in the sorts of debt and the sorts of behaviours are taking on’
Golden logic from the RBA! It’s NOT the house prices, stupid, its the behaviours……and the sorts of debt.
Phil L “I’m shocked to find there’s gambling in this establishment”
Seems and ethical problem… ummmm
haha
https://www.youtube.com/watch?v=SjbPi00k_ME
http://www.watoday.com.au/federal-politics/political-news/turnbull-government-claws-back-4-billion-from-budget-deficit-20170926-gyott8.html
The Turnbull government has clawed back $4 billion from the budget deficit by making billions of dollars in savings from payments to disabled people, students and the unemployed.
The figures from Tuesday’s final budget outcome show the government saved $1.1 billion on payments for services for disabled Australians between July 2016 and July 2017.
Hold your head up high Mr Morrison. You can be a proud Australian, proud as punch that you have the strength of character to pound the unemployed and the disabled into the dust. good on you.
We understand you had no choice. Its not like you could claw back anything from the rent seeking industries that donate to the liberal party, like the banks, mining industry, multi national tech companies, property developers etc etc.
We understand that isnt possible, so what choice did you have.
Trump says Puerto Rico’s debt ‘must be dealt with’
US President Donald Trump said Puerto Rico is in “deep trouble” and that its billions of dollars of debt to Wall Street and banks “must be dealt with”.
“Puerto Rico, which was already suffering from broken infrastructure & massive debt, is in deep trouble,” he wrote in a series of posts on Twitter.
“It’s (sic) old electrical grid, which was in terrible shape, was devastated. Much of the Island was destroyed, with billions of dollars owed to Wall Street and the banks which, sadly, must be dealt with.”
Mr Trump did not offer a pathway for dealing with Puerto Rico’s debt.
The US territory, struggling with $US72 billion ($90.6 billion) in debt, filed the biggest government bankruptcy in US history earlier this year. – snip
http://www.abc.net.au/news/2017-09-26/puerto-rico-blackout-seen-from-space-after-hurricane-maria/8987530
Porto Richo’s debt , Illinois’s debt , Connecticut’s debt , California’s debt …………and on and on ……….. at lot to “deal with”
Looting does take a bite, then some seem confused about 34T-ish in tax havens…. or the expansion of the billionaire class…