Household Debt: What the Data Show

Over the past decade, the debt of the household sector has increased at an average annual rate of 14 per cent, which is well in excess of the growth of household income. As a result, the ratio of household debt to household disposable income in Australia has risen from a level that was low by international standards to one that is in the upper end of the range of other industrial countries. This has attracted a good deal of attention and has raised questions about why this trend has occurred and whether it will continue. The answers to these questions are not obvious and require further disaggregation of the data and comparison with other financial ratios both here and abroad. The remainder of this article attempts to do this by looking at such subjects as: what sort of debt is it; who holds it; what has happened in other countries; and what has been the influence of broad economic variables such as the rate of interest and the rate of inflation.