The average Australian household now carries a record high debt of nearly $250,000.
The figures come from an income and wealth report by AMP/NATSEM called Buy now, pay later: Household debt in Australia and it shows Australian household debt has been growing by 5.3 per cent above the rate of inflation since 1988.
In those years between 1988 and the present, total average household debt in the country has risen from $60,000 to $245,000, and that debt growth rate is much higher than income growth of just 1.3 per cent over the same period.
Following on from that, the household debt to disposable income has nearly tripled over the same period.
The report puts Australians increased willingness to take on debt down to low interest rates, good unemployment figures and a strong economy.
The problem for many Australian households would be if those low interest rates start to rise and put pressure on their income and ability to make repayments.
If rates go up by a few percentage points it could mean many households have to make repayments to levels more around the 50-60 per cent of their income mark. Households would have to find an extra $15,000 – $25,000 a year extra just to cover increased interest payments.
The report found 90 per cent of the country’s household debt is on buying a home or on investments to build wealth. Just over half of that 90 per cent debt recorded in the country is mortgage-related and 36 per cent in rental property and share investing.
The figures place Australian households in fifth place of the highest household debt levels in the world.