September 17, 2017Comments Closed

Australia’s Household Debt Crisis Looms

Posted by:admin onSeptember 17, 2017

Bankruptcy Experts Mount Isa

Today in the news, former economics advisor John Adams revealed that Australia is too late to prevent an ‘economic apocalypse’ even after his continual warnings to the political elites in Canberra. He proceeded to implore the Reserve Bank to raise interest rates to stop household debt getting further out of control.

This bubble is very easy to illustrate. Confidence! It’s the flawed perception that Australia’s last 20 years of continued economic growth will never experience any kind of correction is most disconcerting. Australia survived the GFC and a mining boom and bust. In the meantime, Sydney and Melbourne house prices have not missed a beat or taken a backward step. Sadly, the decision makers and powerful elite in this country reside in these two cities, and see Australia’s economic problems through a completely different lens to the rest of the country. It’s a two-speed economy spiralling out of control.

I recognise that this impending crisis isn’t just as simple as house prices in our two largest cities, however the median house prices in these cities are ever rising and contribute considerably to overall household debt. The experts in Canberra appreciate there’s an enflamed house market but seem to be detested to take on any genuine actions to correct it for fear of a house crash.

As far as the remainder of the country goes, they have a totally different set of economic priorities. For Western Australia and Queensland especially, the mining bust has sent property prices sinking downwards for years now.

Among one of the warning signs that confirm the household debt crisis we are starting to see is the increase in the bankruptcy numbers across the entire country, especially in the 2017 March quarter.

(source: https://www.afsa.gov.au/about-us/newsroom/media-release-regional-personal-insolvency-statistics-march-quarter-2017).

In the insolvency sector, our experts are encountering the damaging effects of house prices going backwards. Though it is not the predominant cause of personal bankruptcies, it most certainly is a vital factor.

House prices going backwards is just part of the dilemma; the other thing is owning a home in this country enables lenders to put you in a very different space as far as borrowing capacity. To put it simply, you can borrow much more if you are a home owner than if you are not a home owner. I bankrupt people everyday and the extent of debt varies largely from the non-home owner to the home owner. Lending is based on algorithms and risk, so I suppose if you own a home you’re more likely to have steady income and less likely to wind up bankrupt, so in turn you can borrow more. If you own a home in Sydney and Melbourne, you’re a safer risk than if you own a home in Mackay, simply due to the fact that in one area the median house prices are booming and the other is going backwards, as it’s been doing so for years.

In conclusion, it seems we are running into a wall at full speed, and there are few people suggesting we slow down. If you wish to know more about the looming household debt crisis then phone us here at Bankruptcy Experts Mount Isa on 1300 795 575 or visit our website to find out more: www.bankruptcyexpertsmountisa.com.au

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