Household debt has become a major concern for Australians. A deficit levy was proposed few months ago to reduce the federal government’s debt burden. To the economists in Australia however, household debt is a graver threat.
National Bank of Australia has conducted a survey recently. The survey has revealed nearly 70% consider themselves good at managing money, but one in five of them faces problems paying bills. Those who live in the rural areas are more likely to face this problem.
Unexpected expenses, on a large part, account for the increase in debt. Respondents considered dental/medical expense as the most common unforeseen expense. Higher-than-anticipated household bill is the second most common unpredictable expense, and sudden needs for auto repairing occupies the third position.
The survey also found an average Australian either breaks his savings or use his credit card whenever he faces the shortage of hard cash. A small percentage sells off some of their possessions. The survey was done on more than 1200 adults.
Adam Mooney, the chief executive at Good Shepherd Microfinance said the survey brings out the difference between people’s belief that they are good managers of money and the reality. He said people go for quick fixes such as selling off their assets when they face financial hardship.
In May 2014, the Reserve Bank of Australia agreed to keep the official interest rate at 2.5%. It was a necessary decision to fix the country’s mounting debt. The figures indicated Australians have a debt of $1.8 trillion to banks and other lending institutions. Australian Bureau of Statistic said the debt burden is among the highest in the developed world.
David Skutenko of Australian Bureau of Statistics said in a statement“ We often compare household debt with household disposable income and, at the moment in Australia in 2013, it was 1.8 times household disposable income.”
If compared to G7 countries such as United States and United Kingdom, Australia falls behind as United States has 1.1 times household disposable income and United Kingdom has 1.5 times household disposable income.
In May this year, the country’s debt stood highest in past 25 years. Since the situation is yet to improve, tough economic measures need to be taken by the government while at the same time, average Australians should learn how to be more frugal.