Australian households have the third highest, and rising debt service ratio, when compared to a wide range of advanced western economies, according to new data released by the Bank for International Settlements (BIS).
This is a timely update from BIS who calculated DSR’s for households and non-financial companies using data from countries national accounts. You can read about their approach here.
The comparative results are interesting, especially give low global interest rates. There are significant variations and the last results are to March 2016.
Australia is near the top of the DSR scores at 15.1, well behind Netherlands and just below Norway. Many other advanced economies are much lower. However, we also see a different trajectory in Australia, with stronger growth here, compared with a static or falling pattern elsewhere.
This is further evidence of the household debt problem here. Of course we had cash rate cuts later in the year, but debt has continued to rise, and our estimate is average household DSR currently sits around 16. If we are right, the rising trajectory has continued.
You can read our more detailed DSR analysis of Australian households, where we discuss the profile across postcodes.
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