Household debt doubles since 1995
The Australian Bureau of Statistics has published new analysis which reveals that total household debt has more than doubled since mid-1995 to the end of March 2002: from $267 billion to $580 billion. The ABS warns that households are becoming increasingly less able to service this debt, which has now almost exceeded households' stock of liquid assets that could be used in a crisis.
Household post-tax income has risen by only 7 per cent a year over the period, while during the same time household debt has increased by 16 per cent a year and mortgage debt by 18 per cent.
Other findings reported in the analysis are: over the period from 1995 to March 2002, household debt has increased from 82 per cent to 122 per cent of disposable household income; the average interest rate being paid on that debt has fallen only slightly, from 8.5 per cent in 1996-97 to 7.6 per cent in 2000-01; household equity in homes and other property fell from 81 per cent in 1995 to 74 per cent by 2001.
The ABS report states that while the average household owns more than five times as much in assets as it owes, 80 per cent of these assets can't be drawn on in times of financial crisis, as they are in real estate and superannuation. The liquid assets of households, such as shares and bank deposits, only just exceed the amount of debt. At the end of March 2002, debt stood at $580 billion and liquid assets at $586 billion, with the debt-to-liquid assets ratio rising from 85 per cent in 1995 to the current 99 per cent.