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 proposed that Australia is too late to stop an ‘economic apocalypse’ even after his repeated warnings to the political elites in Canberra. He proceeded to advise the Reserve Bank to raise interest rates to avoid household debt getting further out of control.

This bubble is easy to describe. Confidence! It’s the fallacious perception that Australia’s last 20 years of continued economic growth will never encounter any form of correction is most troublesome. Australia survived the GFC and a mining boom and bust. In the meantime, Melbourne and Sydney house prices have not missed a beat or taken a backward step. Regretfully, the decision makers and powerful elite in this country reside in these two cities, and see Australia’s economic problems through a completely different lens to the rest of the country. It’s a two-speed economy spiralling uncontrollably.

I recognise that this emerging crisis isn’t just as simple as house prices in our two largest cities, however the median house prices in these cities are ever rising and contribute greatly to overall household debt. The specialists in Canberra are aware of an overpriced house market but seem to be despised to take on any substantial steps to correct it for fear of a house crash.

As far as the remainder of the country goes, they have a completely different set of economic priorities. For Western Australia and Queensland specifically, the mining bust has sent real estate prices sinking downwards for years now.

Among one of the signals that illustrate the household debt crisis we are starting to see is the surge in the bankruptcy numbers throughout the entire country, especially in the 2017 March quarter.


In the insolvency sector, our experts are seeing the disastrous effects of house prices going backwards. While it is not the main cause of personal bankruptcies, it evidently is a decisive factor.

House prices going backwards is just part of the issue; the other thing is owning a home in Australia enables 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 quantity of debt fluctuates largely from the non-home owner to the home owner. Lending is founded on algorithms and risk, so I suppose if you own a home you’re more likely to have consistent 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 not too many people suggesting we slow down. If you need to know more about the looming household debt crisis then phone us here at Bankruptcy Experts Taree on 1300 795 575 or visit our website for additional information:

By | 2020-08-14T02:41:41+00:00 September 13th, 2017|Bankruptcy, Liquidation|0 Comments

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