The data and documents prove the fact that Australians are living under debts. As a result of the debts, Australians on an average spend almost 12 per cent of their income on repaying interests. The situation can be accredited to credit cards partially as the credit card debt is a record breaking $39.6 billion. Even the data of the Reserve Bank shows that from the last three months, the income spent on servicing debt alone saw an increase from 11.6% to 11.9%. The mortgage interest repayments increased from 9.3% to 9.5%. Australia’s Prime minister, Mr. John Howard said that “fairness in Australia is at a 32-year high” as the wages are good and unemployment rate very low. He even emphasized on the point that most of the people who took debts are well enough to pay them back easily.
On the contrary, Labor treasury spokesman Wayne Swan regarding the situation said,
“The reality is that Mr. Howard’s eight rate rises (since 2002), together with soaring petrol and child-care costs, are putting many Australian families under serious financial strain.”
The data from Insolvency and Trustee Service Australia gives a new direction to the topic. Personal bankruptcies, debt agreements and personal insolvency agreements have increased almost 40% since the last seven years. Australians might be able to pay back but as per the experts debt leaves people vulnerable, which can be bad.
HSBC chief economist John Edwards said that higher debt rates can be concerning if unemployment too increases but there is nothing to worry about as Australia has been witnessing increase in employment and wages. As per Nicole Rich, director policy and campaigns with the Consumer Action Law Centre, said that the problem didn’t lie with increasing number of people under debts but with “dodgy” non-bank lenders.
Steve Keen, associate professor with the University of Western Sydney, said, “They’ve risen because you have borrowed money and leveraged up the price. What really matters is the debt-to-income ratio and it’s huge. Ultimately, we can’t keep on doing it (taking on debt). A recession has to happen at some point.”
Source: Theage
