Household debt in Australia : walking the tightrope

Simon Kelly, Rebecca CASSELLS, Ann Harding

    Research output: Working paperDiscussion paper

    Abstract

    In the 1960s and 70s Australians were big believers in having a nest egg of savings set away for a rainy day, just in case. Since then times have changed. Not only have we forgone putting away a small part of our income on a regular basis, our level of household savings is now in the negative. Today debt is a way of life with the average Australian household spending 2.3 per cent more than it earns each week. And all forms of debt are on the increase. Home loans, other property loans, personal loans, HECS and credit card debt are all at record levels. In 2002 the level of debt owed by Australian households represented almost 60 per cent of all economic activity in Australia. For the average Australian household, debt management is a careful balancing act and financial resources are stretched to their limits. The question is: is this sustainable? Are we out of control with our spending or just pushing our debt management skills to their limit? Have we invested too much in our homes and other residential property, at the expense of a more diverse and effective investment strategy? The ninth AMP.NATSEM Income and Wealth Report investigates our relationship with debt and the profile of debt consumption in Australia. This report reveals that as long as sickness or unemployment doesn’t strike, most households should be able to cope, although the average Australian family’s sensitivity to higher interest rates is much more acute than in the past. While top-line figures suggest a picture of out of control consumption, a closer analysis of the data broken down by income and age reveals that debt levels are not shared evenly across the adult population. Households that have clocked up the highest levels of debt also tend to be those best positioned to service it. They’re either at their peak years of earning capacity or they earn a higher than average income. We’re also pretty responsible at managing our debt. Over half the population uses their credit card wisely, paying off their balance every month, and the small minority who have clocked up credit card debt in excess of $10,000 tend to be those who earn the most. Overall, while it’s true we’re cutting it pretty fine these days, most households should be okay. However, in the good old days if times got bad there was always that nest egg to fall back on. Today many families in Australia may not have left themselves that luxury. Those households walking the debt tightrope without a safety net should seek professional financial planning advice in order to ensure they have adequate protection against the impact of a sudden loss of job, illness or the like which could tip them off balance. AMP publishes these reports as a service to the community and to our customers, who make up one in four working Australians. The objective of this report is to make our readers aware of current trends, how these could affect them, and what steps to take to protect their income and future lifestyle.
    Original languageEnglish
    Place of PublicationSydney
    PublisherAMP
    Number of pages19
    Volume9
    Publication statusPublished - 2004

    Fingerprint

    Household debt
    Debt
    Household
    Income
    Credit cards
    Loans
    Debt management
    Management skills
    Luxury
    Wealth and income
    Illness
    Investment strategy
    Savings
    Economic activity
    Safety net
    Interest rates
    Minorities
    Expenses
    Unemployment
    Residential property

    Cite this

    Kelly, S., CASSELLS, R., & Harding, A. (2004). Household debt in Australia : walking the tightrope. Sydney: AMP.
    Kelly, Simon ; CASSELLS, Rebecca ; Harding, Ann. / Household debt in Australia : walking the tightrope. Sydney : AMP, 2004.
    @techreport{453e6b86003147a2a294ff4c73856c60,
    title = "Household debt in Australia : walking the tightrope",
    abstract = "In the 1960s and 70s Australians were big believers in having a nest egg of savings set away for a rainy day, just in case. Since then times have changed. Not only have we forgone putting away a small part of our income on a regular basis, our level of household savings is now in the negative. Today debt is a way of life with the average Australian household spending 2.3 per cent more than it earns each week. And all forms of debt are on the increase. Home loans, other property loans, personal loans, HECS and credit card debt are all at record levels. In 2002 the level of debt owed by Australian households represented almost 60 per cent of all economic activity in Australia. For the average Australian household, debt management is a careful balancing act and financial resources are stretched to their limits. The question is: is this sustainable? Are we out of control with our spending or just pushing our debt management skills to their limit? Have we invested too much in our homes and other residential property, at the expense of a more diverse and effective investment strategy? The ninth AMP.NATSEM Income and Wealth Report investigates our relationship with debt and the profile of debt consumption in Australia. This report reveals that as long as sickness or unemployment doesn’t strike, most households should be able to cope, although the average Australian family’s sensitivity to higher interest rates is much more acute than in the past. While top-line figures suggest a picture of out of control consumption, a closer analysis of the data broken down by income and age reveals that debt levels are not shared evenly across the adult population. Households that have clocked up the highest levels of debt also tend to be those best positioned to service it. They’re either at their peak years of earning capacity or they earn a higher than average income. We’re also pretty responsible at managing our debt. Over half the population uses their credit card wisely, paying off their balance every month, and the small minority who have clocked up credit card debt in excess of $10,000 tend to be those who earn the most. Overall, while it’s true we’re cutting it pretty fine these days, most households should be okay. However, in the good old days if times got bad there was always that nest egg to fall back on. Today many families in Australia may not have left themselves that luxury. Those households walking the debt tightrope without a safety net should seek professional financial planning advice in order to ensure they have adequate protection against the impact of a sudden loss of job, illness or the like which could tip them off balance. AMP publishes these reports as a service to the community and to our customers, who make up one in four working Australians. The objective of this report is to make our readers aware of current trends, how these could affect them, and what steps to take to protect their income and future lifestyle.",
    author = "Simon Kelly and Rebecca CASSELLS and Ann Harding",
    year = "2004",
    language = "English",
    volume = "9",
    publisher = "AMP",
    type = "WorkingPaper",
    institution = "AMP",

    }

    Kelly, S, CASSELLS, R & Harding, A 2004 'Household debt in Australia : walking the tightrope' AMP, Sydney.

    Household debt in Australia : walking the tightrope. / Kelly, Simon; CASSELLS, Rebecca; Harding, Ann.

    Sydney : AMP, 2004.

    Research output: Working paperDiscussion paper

    TY - UNPB

    T1 - Household debt in Australia : walking the tightrope

    AU - Kelly, Simon

    AU - CASSELLS, Rebecca

    AU - Harding, Ann

    PY - 2004

    Y1 - 2004

    N2 - In the 1960s and 70s Australians were big believers in having a nest egg of savings set away for a rainy day, just in case. Since then times have changed. Not only have we forgone putting away a small part of our income on a regular basis, our level of household savings is now in the negative. Today debt is a way of life with the average Australian household spending 2.3 per cent more than it earns each week. And all forms of debt are on the increase. Home loans, other property loans, personal loans, HECS and credit card debt are all at record levels. In 2002 the level of debt owed by Australian households represented almost 60 per cent of all economic activity in Australia. For the average Australian household, debt management is a careful balancing act and financial resources are stretched to their limits. The question is: is this sustainable? Are we out of control with our spending or just pushing our debt management skills to their limit? Have we invested too much in our homes and other residential property, at the expense of a more diverse and effective investment strategy? The ninth AMP.NATSEM Income and Wealth Report investigates our relationship with debt and the profile of debt consumption in Australia. This report reveals that as long as sickness or unemployment doesn’t strike, most households should be able to cope, although the average Australian family’s sensitivity to higher interest rates is much more acute than in the past. While top-line figures suggest a picture of out of control consumption, a closer analysis of the data broken down by income and age reveals that debt levels are not shared evenly across the adult population. Households that have clocked up the highest levels of debt also tend to be those best positioned to service it. They’re either at their peak years of earning capacity or they earn a higher than average income. We’re also pretty responsible at managing our debt. Over half the population uses their credit card wisely, paying off their balance every month, and the small minority who have clocked up credit card debt in excess of $10,000 tend to be those who earn the most. Overall, while it’s true we’re cutting it pretty fine these days, most households should be okay. However, in the good old days if times got bad there was always that nest egg to fall back on. Today many families in Australia may not have left themselves that luxury. Those households walking the debt tightrope without a safety net should seek professional financial planning advice in order to ensure they have adequate protection against the impact of a sudden loss of job, illness or the like which could tip them off balance. AMP publishes these reports as a service to the community and to our customers, who make up one in four working Australians. The objective of this report is to make our readers aware of current trends, how these could affect them, and what steps to take to protect their income and future lifestyle.

    AB - In the 1960s and 70s Australians were big believers in having a nest egg of savings set away for a rainy day, just in case. Since then times have changed. Not only have we forgone putting away a small part of our income on a regular basis, our level of household savings is now in the negative. Today debt is a way of life with the average Australian household spending 2.3 per cent more than it earns each week. And all forms of debt are on the increase. Home loans, other property loans, personal loans, HECS and credit card debt are all at record levels. In 2002 the level of debt owed by Australian households represented almost 60 per cent of all economic activity in Australia. For the average Australian household, debt management is a careful balancing act and financial resources are stretched to their limits. The question is: is this sustainable? Are we out of control with our spending or just pushing our debt management skills to their limit? Have we invested too much in our homes and other residential property, at the expense of a more diverse and effective investment strategy? The ninth AMP.NATSEM Income and Wealth Report investigates our relationship with debt and the profile of debt consumption in Australia. This report reveals that as long as sickness or unemployment doesn’t strike, most households should be able to cope, although the average Australian family’s sensitivity to higher interest rates is much more acute than in the past. While top-line figures suggest a picture of out of control consumption, a closer analysis of the data broken down by income and age reveals that debt levels are not shared evenly across the adult population. Households that have clocked up the highest levels of debt also tend to be those best positioned to service it. They’re either at their peak years of earning capacity or they earn a higher than average income. We’re also pretty responsible at managing our debt. Over half the population uses their credit card wisely, paying off their balance every month, and the small minority who have clocked up credit card debt in excess of $10,000 tend to be those who earn the most. Overall, while it’s true we’re cutting it pretty fine these days, most households should be okay. However, in the good old days if times got bad there was always that nest egg to fall back on. Today many families in Australia may not have left themselves that luxury. Those households walking the debt tightrope without a safety net should seek professional financial planning advice in order to ensure they have adequate protection against the impact of a sudden loss of job, illness or the like which could tip them off balance. AMP publishes these reports as a service to the community and to our customers, who make up one in four working Australians. The objective of this report is to make our readers aware of current trends, how these could affect them, and what steps to take to protect their income and future lifestyle.

    M3 - Discussion paper

    VL - 9

    BT - Household debt in Australia : walking the tightrope

    PB - AMP

    CY - Sydney

    ER -

    Kelly S, CASSELLS R, Harding A. Household debt in Australia : walking the tightrope. Sydney: AMP. 2004.