Australians lead the world in personal debt, with the value of what households owe exceeding the value of what the entire economy produces.Reserve Bank of Australia figures released Sunday showed Australia had overtaken the United States in terms of debt racked up on mortgages, bank borrowing and on credit cards.
The central bank said the average US adult owed 44,000 US dollars against 56,000 US dollars for the average Australian adult. The value of personal debt is now larger than gross domestic product, which measures the annual value of the goods and services the economy produces. Lending for housing accounts for 90 per cent of personal debt, with the remainder made up by overdrafts and credit card debt.
Research firm Fujitsu Consulting estimated the average household pays 39 per cent of its income on servicing and repaying debt.
With the cost of borrowing set to rise as soon as January, the burden of debt servicing is set to get even more onerous. Interest rates now start at 3.75 per cent, after three consecutive increases. As with individuals, so with the government: Prime Minister Kevin Rudd has maxed out the national credit card. Australia went into the global financial crisis without government debt and riding high on a mining boom powered by demand from China.
But stimulus spending of 42 billion Australian dollars (36 billion US dollars) - one of the biggest packages relative to population in the developed world - has erased the surplus and taken the national accounts heavily into deficit.