Australian’s Increase Debt to Maintain Lifestyles.
Debt Agreement volume increased by 15.6% in the March quarter 2016, to an all-time high of 2968. Debt Agreement volume is expected to remain high for the foreseeable future.
RBA figures show that the household debt to disposable incomes ratio is at an historic high 186.3% and increasing faster than GDP growth at 3.4% per annum. This indicates that debt is growing faster than income.
Unemployment remains high around at 5.5%, this is around post GFC levels. However those who are underemployed, who are working less than they would like, are at an all-time high, of 11%. So while people are employed their over-time has disappeared, and many cases casual workers have had their hours reduced. Many people incurred debt when hours were plentiful and are under increasing pressure.
Accommodation costs remain high. The percentage of income spent on accommodation has increased from 17% to 20% over the past 10 years and up from 8%, 50 years ago.
While the economic environment is one that leads to rising bankruptcy levels, rising unemployment, declining GDP, it is an environment of increasing financial pressure, ie one that leads to increasing numbers of Debt Agreements. Australian’s are being squeezed by increasing accommodation costs, under-employment and stagnant wages. Australian’s have been maintaining their lifestyles through increasing levels of debt however at some point this must unravel.