In the debate surrounding the viability of individual households servicing ever larger mortgages, the fact that Australia has yet to see large-scale defaults is often cited as evidence that the current level of debt is sustainable.
Others use this as evidence to support the argument that we should allow households to incur even higher debt levels.
Leaving aside the issues with comparing mortgage arrears over time and the apparent fact that Australia has not experienced a severe economic downturn without significant government intervention in almost 35 years, what the debate overlooks is the impact of the larger debt load, which is being held for longer, on the broader economy.
