Aussies shun debt. Unless it’s for property

Thursday’s Lending Indicators data for October from the Australian Bureau of Statistics (ABS) revealed that Australian households continue to shun consumer borrowings, with personal finance commitments collapsing to another record low:

As shown above, annual new personal finance commitments fell by 15.3% year-on-year and were 42% below the long-term average.

This followed last week’s private credit data from the RBA, which also showed that personal credit has plummeted to its lowest level on record:

The outstanding stock of personal loans fell by a record 12.7% in the year to October, easily eclipsing the falls experienced during the early-1990s recession (-6.0%) and the GFC (-7.8%).

The only area where Australian households are gearing up is for property purchases:

The growth in new mortgage commitments (excluding refinancings) has lifted to levels not seen since 2013.

That said, growth in the stock of mortgage credit outstanding (mortgage growth) has barely lifted, suggesting those already “in” the market are repaying their mortgages at a furious pace, largely offsetting the new mortgage demand.

The bottom line is that Australian households are shunning debt for everything other than to purchase a new home.

Unconventional Economist


  1. And somewhere along the line if the price paid for a home was $500k less than it will cost today; just back to what it was 10 years ago(?), that’s ~$15,000 per property per annum of principal and interest repayments that could have been used; spent, elsewhere into the economy.

    • chuckmuscleMEMBER

      Probably on imports.

      But the point you make cannot be understated – new business venture or domestic consumption would have actually done something for the economy. Instead we are all “wealthier”.

    • There is absolutely no doubt that some people are jumping into the property market with both feet – but the reality is that there is huge stock piling up, with massive amounts being withdrawn as well.

      Time to buy at the start of the pandemic was September 2021 – with subsidies and insolvency / mortgage holidays not ending till March nothing has changed my mind on that.

      • Government will extend Jobkeeper at the 11th hour. Insolvency will get pushed back further just like they have already done with mortgage holidays… Extend and pretend is the new mantra.

      • Where is this ‘huge stock’ you talk of? In apartments, certainly. Free-standing homes are being tightly held and demand is huge – particularly in regional areas.

    • But it is spent elsewhere now, The bank takes it and gives it to another new loan applicant in a different suburb….. oh wait, is that not what you meant by elsewhere…. 😉

    • Jumping jack flash

      The insatiable need for enormous quantities of debt redirects discretionary spending away from the economy, either to be hoarded to obtain the colossal amount of debt that is required, or paid to the banks for the debt.

      However, the New Economy depends on debt never being paid back. If debt is paid back in full plus interest it is enormously deflationary. That is why debt and its interest is ideally repaid using an even larger pile of debt that is magicked up and handed to someone to use to “buy” someone else’s debt from them, plus a bit extra on top for the interest and expected capital gains.

      This is why the debt growth rate is so important. If it is too low, then we start noticing the deflation.

      This is why we had over 10 years of interest rate cuts, to try and spur the debt growth back to an acceptable rate.

      The last 10 years of deflation was small enough to not show up in any reports as a problem, but large enough to cause many once robust businesses to collapse.

  2. House next to me sold on Sat. Large house (6 bed) on large block (1200) with a pool in nice Syd suburb. Built in the late 80’s so would need $200k+ to bring up to todays standards. Sold at auction for just under $2.7m
    No probs to get there.

  3. I will still comment every time I see these charts – where is Afterpay “credit” in this? Where is Zip etc.

    The growth in the BNPL sector has been breathtaking. Millennial have stacks of debt – it just isn’t measured as such. Just like Uber’s “innovation” was just ignoring regulations pertaining to taxi’s the BNPL sector “innovation” is simply ignoring credit regulations.

    • A young person can only get a line of credit for like $2k with a company like Zip? Even if it was across a few BNPL and max 10k, I’d hardly say that’s stacks of debt.

      • In terms of personal finance – ie. excluding mortgages – the omission of BNPL seems very significant. BNPL is a direct replacement for credit cards and personal loans & where all the growth has been.

  4. Jumping jack flash

    Good but not great. It needs to continue to grow! The debt growth needs to be a lot higher otherwise we will slide back into the ever-so-gradual deflation that cant be effectively countered with wage theft. Certainly not these days:

    I was talking with one of the business owners my wife contracts for on the weekend and he said he was finding it very hard to find workers since there’s no foreign workers around now.

    We were there for a bond clean of one of his 3 IPs and he drove off in some kind of Beemer SUV probably worth around 100K or more.

    Winning! But wage theft alone isnt enough. We need sufficient debt growth to inflate everything including wages, eventually. Only then will the Debt Engine roar back into life.

  5. Will low interest rates affect investment properties turning positive geared and “investors” no longer able to claim negative gearing? Would this have any impact on the grand scheme of things?


      Many folks will be asking the banks to please charge them higher interest rates so they can have a bigger tax return!