The problem for Australia is household debt levels which are at new historic highs. The latest figures show the household debt-to-income ratio at a record 186% and the household debt to GDP ratio at a record high of 123%.
In fact, Australia now has the unenviable title of being the most indebted nation - in terms of both household debt to income as well as household debt to GDP - on Earth! This is on the back of a $2 trillion debt-financed property bubble. A bubble that when - not if - it deflates will destroy household wealth and ultimately force a government bailout of Australian banks which have become so over-leveraged to the precarious housing market. The prudent pro-action would be to prepare accordingly.
