Australia’s Household Debt Crisis Looms

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Australia’s Household Debt Crisis Looms

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Today in the news, former economics advisor John Adams indicated that Australia is too late to avoid an ‘economic apocalypse’ regardless of his incessant warnings to the political elites in Canberra. He proceeded to urge 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 misconstrued perception that Australia’s last twenty years of continued economic growth will never experience any sort of correction is most worrying. Australia survived the GFC and a mining boom and bust. Meanwhile, Sydney and Melbourne house prices have not skipped a beat or taken a backward step. Unfortunately, the decision makers and powerful elite in this country live in these two cities, and see Australia’s economic problems through a totally different lens to the rest of the country. It’s a two-speed economy spiralling out of control.

I accept that this emerging crisis isn’t just as straightforward as house prices in our two largest cities, however the median house prices in these cities are ever rising and contribute considerably to total household debt. The boffins in Canberra appreciate there’s an overheated house market but appear to be reviled to take on any serious measures to correct it for fear of a property crash.

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

Just one of the signs that demonstrate the household debt crisis we are starting to see is the increase in the bankruptcy numbers throughout the entire country, especially in the 2017 March quarter.


In the insolvency market, our company are inspecting the adverse effects of house prices going backwards. Though it is not the primary cause of personal bankruptcies, it evidently is a vital factor.

House prices going backwards is just part of the predicament; the other thing is owning a home in this country enables lenders to put you in a very different space as far as borrowing capacity. Simply put, you can borrow far more if you are a home owner than if you are not a home owner. I bankrupt people everyday and the quantity of debt varies largely from the non-home owner to the home owner. Lending is hinged 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 consequently you can borrow more. If you own a home in Melbourne or Sydney, 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 seems 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 call us here at Bankruptcy Experts Kalgoorlie on 1300 795 575 or visit our website for more information:

By | 2020-08-17T01:00:52+00:00 September 17th, 2017|Article, bankruptcy, blog|0 Comments

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