Macro Breakdown: Houston we have a household debt problem

In today’s Macro Breakdown I discuss why I believe that Australia’s household debt load – ranked second highest in the world – poses a problem for the Australian economy in the era of rising interest rates.

The video showcases recent data on household debt, debt repayments and mortgage rates as provided by official sources and shows some basic sensitivity analysis of what would happen if mortgage rates rose as forecast by economists and markets.

The Macro Breakdown series, which I plan to deliver several times a week, will reside on my YouTube channel at Leithvo.

Unconventional Economist
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Comments

    • I haven’t listened to the podcast but is it something along the lines of “a small % adjustment on a large amount of money is a large amount of money?”

      Now back to work, you’ve all got debt to pay off.

  1. Australia’s household debt load – ranked second highest in the world – poses a problem correction for the Australian economy in the era of rising interest rates

    The glass doesn’t have to be half empty.

    • happy valleyMEMBER

      The reality is the debt load poses an opportunity – to load up even more and once and for all, claim our rightful title to gold, gold, gold.

    • Camden HavenMEMBER

      How will Victoria be able to service State debts 200 billion mentioned here if things slow and spreads spread? No more SSB’s to pawn

    • Jumping jack flash

      Only a hundred million. Either they’re talking it up or Russia in a very bad way.

  2. BubbleyMEMBER

    .25 will slow the economy by 0.5 it will come to a halt.

    The sad part is the LNP have been grinding the economy into the ground through corruption and neglect and Labor is going to get stuck with a toxic mess.

    Its going to be like the 1990’s recession and the GFC all over again. Labor gets the crappy times, does all the heavy lifting and the LNP ride in on the recovery, claiming “we’re better economic managers”

    It turns my head into a flaming skull of rage. Especially as the MSM are complicit in the cover up.

    • Leroy Huggins

      There has been no “heavy lifting” since I have been alive. Just Australia floating along and rising & falling with international trends.

      And the things Labor would promote itself on, like the expansion of the university system, did nothing but pump unsuitable people into the system and degrade the educations of those that deserved to be there.

      In effect the education system was dumbed down to met the newcomers, rather than the newcomers “skilling up”. Almost everything Labor has ever done fits this format, a negative, it just requires a view past the primary consequences & intent of their policies, to the further sequence of events and consequences it leads to.

      On the things that would really make a difference: restricting immigration, mining super profits tax, replacement of foreign miners by home grown outfits, removal of the right of foreigners to purchase land etc, they are nowhere on.

      • Jumping jack flash

        This problem is not surprising whatsoever.
        By 2019 the western debt economies were in a shambles due to the zero interest rate bound being hit. No longer could banks simply reduce the price of their debt to get people to buy more while wages were stagnant and CPI contained, more or less.

        Fortunately COVID came along and with it unprecedented stimulus, a thinly veiled bailout of the debt economy to kick off a tidal wave of global inflation to inflate the debt away and kick off perpetual debt.

        Scomo, without a skerrick of a clue, didnt get or read the memo and our non-stimulus basically did nothing. The only wage inflation we got was purely accidental.

        Now the world is recovering and ready to raise interest rates. And interest rates will rise whether we are ready for it or not. We have little choice but to do the same as everyone else does, just like we did on the way down.

    • TRADINGtheAPOCALYPSE

      Just get it over with already. Once house prices crater, and the economy with them, we can start rebuilding the bubbles again!

    • Both the majors are sh!te, dont understand the party loyalty if you judge on outcomes and policies.

    • You do know who bailed out the banks, therefore real estate during the GFC don’t you?

  3. – Yes, I think the RBA will raise rates perhaps even as soon as this or next month.