Australia’s Household Debt Crisis Looms

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Australia’s Household Debt Crisis Looms


Today in the news, former economics advisor John Adams indicated that Australia is too late to stop an ‘economic apocalypse’ even after his continual warnings to the political elites in Canberra. He proceeded to insist the Reserve Bank to raise interest rates to stop household debt getting further out of hand.

This bubble is very easy to understand. Confidence! It’s the false perception that Australia’s last 20 years of continual economic growth will never encounter any kind of correction is most distressing. Australia survived the GFC and a mining boom and bust. Meanwhile, Sydney and Melbourne house prices have not missed a beat or taken a backward step. Sadly, the decision makers and powerful elite in Australia live in these two cities, and see Australia’s economic problems through an entirely different lens to the remainder of the country. It’s a two-speed economy spiralling uncontrollably.

I accept that this emerging crisis isn’t just as straightforward as house prices in our two largest cities, but the median house prices in these cities are ever rising and contribute dramatically to overall household debt. The specialists in Canberra understand that there’s an overheated house market but seem to be reviled to take on any focused steps to correct it for fear of a house crash.

As far as the remainder of the country goes, they have an entirely different set of economic prerogatives. For Western Australia and Queensland especially, the mining bust has sent property prices sinking downwards for years now.

Among one of the signs that demonstrate the household debt crisis we are beginning to see is the increase in the bankruptcy numbers over the entire country, specifically in the March 2017 quarter.


In the insolvency market, our company are witnessing the disastrous effects of house prices going backwards. Though it is not the primary cause of personal bankruptcies, it most certainly is a pivotal factor.

House prices going backwards is just part of the challenge; the other thing is owning a home in this country allows lenders to put you in a very different space as far as borrowing capacity. To put it simply, you can borrow a lot more if you are a home owner than if you are not a home owner. I bankrupt people everyday and the extent of debt varies largely from the non-home owner to the home owner. Lending is based on algorithms and risk, so I suppose if you own a home you’re more likely to have steady income and less likely to end up bankrupt, so subsequently you can borrow more. If you own a home in Sydney and Melbourne, you’re a safer risk than if you own a home in Mackay, simply because in one area the median house prices are booming and the other is going backwards, as it’s been doing so for years.

In conclusion, it appears we are running into a wall at full speed, and there are few people suggesting we slow down. If you wish to know more about the looming household debt crisis then call us here at Bankruptcy Experts Dubbo on 1300 795 575 or visit our website for additional information:

By | 2020-08-17T00:08:07+00:00 September 14th, 2017|banrkuptcy, blog|0 Comments

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