Australian firms have some of the highest Debt Service Ratio’s in the world according to data from the Bank for International Settlements. Alongside the household Debt Service Ratios, which we discussed earlier BIS also published a series on the DSR’s of non-financial companies.
Australian and Canadian companies have the highest DSR’s and both show a strong upward trajectory. Many other countries have lower, and flatter profiles. The higher the DSR, the greater the strain on company cash flow.
This many well explain the relatively slow rise in additional debt being drawn down by Australian firms (other than funding for investment property!) and the knock-on effects of lower real productive growth.
We think DSR’s should be more widely studied as a bellwether for future economic performance.
