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Debt

World-Beating Debts Crippling Aussie Lifestyles

 January 16, 2020

By  Chase Edwards

With household debt standing at roughly 120 percent of our gross domestic product, only the Swiss have more debt than us Aussies. The dubious honour is taking a substantial toll on the way we’re living, according to new research. Household debt is a growing problem within our society. 37 percent of us struggle to pay off our own debts, according to the ABC’s Australia Talks National Survey. However, when you zoom in on millennials, that number jumps to nearly 50 percent.

We seem to have become more relaxed about debt over time, with our national household debt figure nearly tripling in the 28 years since our last recession. However, with household debts at national record levels, we’re no longer feeling so calm about being in the red. Nine out of 10 of the nearly 55,000 respondents to the ABC’s survey said they felt household debt was a problem for Australia. Home loans account for the majority of our household debt, with mortgage holders owing an average of $350,000. That figure has more than doubled since the 2001/2002 financial year. Property purchases make up a substantial amount of housing debt, but other expenses are also factored into these figures with 30 to 40 percent of mortgage holders who don’t buy new homes actually increasing their loan amount from year to year. “When people are increasing their debt from one year to the next, they’re essentially accessing the equity in their home,” explained Professor Roger Wilkins, deputy director of the Household Income and Labour Dynamics in Australia survey. “People are evidently using that increased equity to fund consumption. Now that consumption could take many different forms — it could be renovating the home, it could be going on holiday, buying a new car.” However, with banks becoming more cautious about lending money it seems the party may be over.

We’re spending less, despite recent rate cuts. We’re also working more, with research from Curtin University discovering increasing numbers of older Australians are working longer to pay off their mortgages. “If you’re aged in your 40s, 50s or 60s and you’ve paid off your mortgage debt then the odds of you leaving the workforce is about four to five times higher than someone in the same age group who still has a mortgage debt burden,” explained Professor Rachel Ong ZiforJ. “A mortgagor who’s in his or her 50s or 60s would increase their odds of staying in employment by 18 per cent for every $100,000 in increase in their mortgage debt.” Women are also increasing their workforce participation with more than 61 percent of females in or looking for employment, roughly 10 percent more than the early 1990s. This substantial jump shows the increased necessity for dual-income households.

If like so many Australians you’re struggling with household debt, call Chase Edwards on 1300 854 833. We don’t think Aussies should spend their golden years in the office or cut their spending so much that they miss out on living. Our financial experts would love to talk to you about smarter debt minimisation strategies and ways to grow your wealth. Make the call and start this life-changing conversation today.

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