The Bank for International Settlements (BIS) has released its global household debt statistics for the June quarter of 2021. This data shows that Australia still has the second highest stock of household debt in the world when measured against the size of its economy, as measured by Gross Domestic Product (GDP).
As shown in the table below, Australia’s household debt-to-GDP ratio was 121% in Q2 2021, second only to Switzerland (132%):
The next chart plots the time series across the Anglosphere, with Australia’s household debt load well ahead of Canada (108%), New Zealand (98%), the United Kingdom (87%), the United States (79%), and Ireland (32%):
However, because mortgage rates have fallen to record lows, Australian household’s debt repayment burden – i.e. principal and interest repayments as a ratio of disposable income – has fallen markedly over the past two years as mortgage rates have collapsed. In Q2 2021, the debt repayment ratio was 13.5%; although it has begun to tick higher. Australia’s ratio is also the highest in the Anglosphere:
The next chart combines the BIS series with the RBA’s household interest payment ratio, which fell to 5.7% in June 2021, less than half the peak of 13.3% in December 2008:
In a similar vein, the ratio of mortgage debt interest payments to income fell to 4.7% in June 2021, less than half the peak of 10.6% in December 2008.
In summary, Aussie households as a whole are sitting pretty despite their big household debt loads. Problems won’t arise until mortgage rates begin to rise.