Household debt in Australia

Over the past two decades, Australian households’ debt levels have increased noticeably and are now fairly high by international standards. The increase in household debt is due largely to the sharp rise in housing debt. This paper first outlines the main drivers of the increase in housing debt: lower interest rates, increased availability of housing finance and strong demand for debt from investors. Next, it discusses the impact of the higher debt levels on households’ debt servicing ratios and net worth. Third, it describes the impact of the turbulence in global capital markets on the Australian housing finance market. Last, it briefly discusses some of the implications of the increase in household debt for monetary policy and financial stability.