{"id":486498,"date":"2026-02-17T21:04:09","date_gmt":"2026-02-17T21:04:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/486498\/"},"modified":"2026-02-17T21:04:09","modified_gmt":"2026-02-17T21:04:09","slug":"nearly-triple-1990-levels-driven-by-housing-debt","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/486498\/","title":{"rendered":"Nearly triple 1990 levels, driven by housing debt"},"content":{"rendered":"

Households\u2019 ratio of debt to annualised disposable income was 67.9 per cent in March 1990, and the ratio of housing debt to annualised disposable income was just 31.5 per cent.<\/p>\n

\u201cWhen you look at the trajectory of debt from the early 1990s to now, not only has overall debt risen significantly, but the housing-debt component has risen from less than half to about three quarters,\u201d said Lawless.<\/p>\n

\u201cToday, household debt is at near-record highs.\u201d<\/p>\n

Independent economist Saul Eslake said widespread changes in Australia\u2019s banking sector in the early 1990s made it easier for households to start borrowing more.<\/p>\n

For one, lenders began including female earners when assessing household income.<\/p>\n

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\u201cIt was incredibly sexist, but until the early 1990s banks would typically disregard the earnings of a female partner because they assumed that she would soon be stopping work and having babies,\u201d Eslake said.<\/p>\n

Concurrently, deregulation and the privatisation of some financial institutions increased competition between the banks, prompting some to relax their lending standards.<\/p>\n

\u201cThis was generally perceived as a good thing: people could borrow more money, so they were more likely to become home owners,\u201d Eslake said.<\/p>\n

The 1990s also marked the beginning of the run-up in Australian property prices that continues today, Eslake said.<\/p>\n

\u201cSince then, house prices have risen more than twice as much as incomes have risen.\u201d<\/p>\n

\"Lack<\/p>\n

Lack of housing supply has been a key driver of Australian property prices.Credit: Oscar Colman<\/p>\n

He said a lack of housing supply had been the key driver of Australian property prices, but financial, taxation and other economic policies had also played a part.<\/p>\n

In 1999, for example, changes to the capital gains tax regime made negative gearing an attractive investment strategy, encouraging more Australians to buy investment properties with debt.<\/p>\n

\u201cAnything that allows Australians to spend more on housing than they\u2019d otherwise be able to \u2013 be it easier credit conditions, tax breaks for investors, stamp duty concessions or first home owner schemes \u2013 results in more expensive housing<\/a>,\u201d Eslake said.<\/p>\n

Despite the current high levels of household debt, Lawless said the risk of large numbers of Australians defaulting on their loans was low.<\/p>\n

\u201cWe still have very strong prudential standards, where borrowers are assessed on their ability to repay their debt under certain stress situations.\u201d<\/p>\n

Those standards meant Australian borrowers were generally \u201cswimming between the flags\u201d where it was relatively safe to do so.<\/p>\n

\u201cMortgage arrears rates are about 1.6 per cent, which is extraordinarily small, and I think reflects the responsible lending standards that Australian lenders and regulators have imposed.\u201d<\/p>\n

Eslake said Australians had accumulated not just debt, but also assets like property, helping offset the nation\u2019s current debt burden.<\/p>\n

\u201cAlthough debt is near a record high as a percentage of income, it is well below the 2009 record high as a percentage of the assets against which it\u2019s secured.\u201d<\/p>\n

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For the current debt situation to become a mortgage-default crisis, unemployment would need to rise significantly, said Lawless.<\/p>\n

\u201cAt the moment, labour markets are very tight, and they\u2019re forecast to remain tight for the next couple of years. Most people who want a job have a job, and that acts as another safety blanket for the Australian housing sector.\u201d<\/p>\n

Eslake said the importance of home ownership in Australia\u2019s psyche meant most borrowers would \u201cdo anything\u201d to avoid defaulting. <\/p>\n

\u201cWe Australians are pretty shameless about lots of things, but that\u2019s something we\u2019ll go to extraordinary lengths to avoid. We\u2019ll take our kids out of private schools. We\u2019ll not go on holidays. We\u2019ll go to Macca\u2019s instead of better restaurants, or not go to Macca\u2019s at all,\u201d he said.<\/p>\n

Despite their reassurances, both Eslake and Lawless said Australia had entered a new era of financial angst.<\/p>\n

\u201cA decade ago, hardly anyone was tuning in to the Reserve Bank\u2019s interest-rate decision on the first Tuesday of the month,\u201d said Lawless. \u201dNow, everybody does.\u201d <\/p>\n","protected":false},"excerpt":{"rendered":"Households\u2019 ratio of debt to annualised disposable income was 67.9 per cent in March 1990, and the ratio…\n","protected":false},"author":2,"featured_media":486499,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164],"class_list":["post-486498","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/486498","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=486498"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/486498\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/486499"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=486498"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=486498"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=486498"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}