Wallowing In Debt

The long comparative data series from the Bank for International Settlements provides a useful and well documented relative comparisons across countries and over time.  They are careful to compare like with like!

The data on household debt relative to GDP is one of the most significant – “Credit to Households and NPISHs from All sectors at Market value – Percentage of GDP – Adjusted for breaks”.  Here is a set comparing Australian Household Debt with USA, Canada, New Zealand and Hong Kong and Ireland. Australian households are wallowing in debt (no wonder mortgage stress is so high), even relative to Canada (where home prices have now started to fall), Hong Kong (where prices are in absolute terms higher), and New Zealand (where the Reserve Bank there has been much more proactive in tacking the ballooning debt). See also the plunge in debt in Ireland, still trying to deal with the collapse which followed the GFC in 2007.

If we then add in the range of other economies (which I accept makes the chart more complex), we find that only Switzerland has a higher ratio. Even those Scandinavian countries with high ratios and high home prices are below Australia. Interesting then that household wealth, according to the recent survey, was highest in Switzerland, then Australia, thanks to high home values (but of course supported by very high debt).

We appear to have settings which simply are allowing this debt to continue to accumulate – and over the weekend the QLD election campaign included promises of yet more assistance to first time buyers worth $30m, further stoking the debt pyre.

Author: Martin North

Martin North is the Principal of Digital Finance Analytics

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