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Barclay's Bank have produced an interesting report into Australian household debt levels as a percentage of GDP, comparing Australia to the rest of the world.
Prior to approximately 1993, Australia's household debt to GDP was largely in line with the world average and was sitting at approximately 50%.
After 1993 Australia's ratio of household debt to GDP has risen significantly. By 1995 with the world average was reducing, Australia's household debt level increased outside the 25th - 75th percentile.
Looking at levels in 2008 before the global financial woes;
Following the 2008 financial woes, the global trend has been down, yet Australia continues its upward trend. In 2015;
An important qualification from Barclay's bank to their data set was that household disposable incomes were not used in their calculations as they could not reliably obtain this data set from the countries included.
So why are we interested in this from a debt collection perspective?
This data set raises some interesting questions for collections. The most pertinent point is are the debt levels in Australian households sustainable? We have enjoyed a very long period of low interest rates. How many households have over committed themselves and will be in financial distress when interest rates start to go up? The next question that springs to mind in this context is are we in a property bubble? And what is going to happen to borrowers who have stretched themselves and paid top dollar with interest rates being low?
The debt collection implications for Australia should the answer be YES to the above questions is alarming. Lenders are very likely to experience shortfalls on mortgaged property, which in turn will see a significant rise in bankruptcy occurrences and collection of these accounts not possible. It is likely that more collectors will be required to manage the delinquency process due to the additional volume.