September 14, 2017 Comments Closed

Australia’s Household Debt Crisis Looms

Posted by:admin onSeptember 14, 2017


Today in the news, former economics advisor John Adams advised that Australia is too late to stop an ‘economic apocalypse’ even after his repetitive 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 hand.

This bubble is simple to express. Confidence! It’s the unfounded perception that Australia’s last 20 years of sustained economic growth will never experience 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. Sadly, the decision makers and powerful elite in this country reside in these two cities, and see Australia’s economic obstacles through an entirely different lens to the remainder of the country. It’s a two-speed economy spiralling uncontrollably.

I concede that this emerging crisis isn’t just as straightforward as house prices in our two biggest cities, but the median house prices in these cities are ever rising and contribute substantially to overall household debt. The experts in Canberra understand that there’s an inflamed house market but appear to be despised to take on any stern actions to correct it for fear of a housing crash.

As far as the rest of the country goes, they have an entirely different set of economic prerogatives. For Western Australia and Queensland especially, the mining bust has sent property prices tumbling downwards for years now.

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


In the insolvency market, we are discovering the devastating effects of house prices going backwards. While it is not the leading cause of personal bankruptcies, it certainly is a vital factor.

House prices going backwards is just part of the issue; the other thing is owning a home in this country allows lenders to put you in a very different space as far as borrowing capacity. Simply put, you can borrow much more if you are a home owner than if you are not a home owner. I bankrupt people everyday and the level of debt fluctuates greatly from the non-home owner to the home owner. Lending is based upon algorithms and risk, so I suppose if you own a home you’re more likely to have reliable income and less likely to end up bankrupt, so in turn 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 due to the fact that 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 very few people suggesting we slow down. If you want to know more about the looming household debt crisis then get in contact with us here at Bankruptcy Experts Ipswich on 1300 795 575 or visit our website for additional information:

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