Just about everyone is aware of raising levels of debt, especially as we still experience the challenges from the COVID19 shutdown in previous years. Both individual households and businesses in Australia have to consider their financial goals, planning ahead for an uncertain future. Let’s take a closer look at Australia’s 2022 debt statistics.
Compared to other countries with similar economic levels, Australia continues to have the highest percentage of net household debt. In 2022, the average household debt went up a startling 7.3%. Meanwhile, wages largely stayed the same, leading to increased economic challenges. How does your budget stack up against the country’s average? In this guide, take a real-world look at Australia’s 2022 debt statistics.
What Type of Debt Do Aussies Have?
When you first learn that the average household debt in Australia was up in 2022, it’s normal to want to know more. The overall household debt is at US$1.95 billion, but this number shouldn’t leave you too alarmed.
The Australian Bureau of Statistics (ABS) breaks down the specifics of this number, sharing the individual ways people have their debt divided. The vast majority of household debt is dedicated to home mortgages at 56%. The average Australian mortgage is at around $595,568, and more people are embarking on their own homeowner journeys.
Aside from mortgages, the remainder of the debt includes:
- Investor debt: Household debt also includes over 37% investor debt. This means rental properties or shares. In other words, this is debt taken on as a business opportunity.
- Personal debt: Of course, personal loans are also a part of Australia’s household debt, though only around 3%. Personal loans are used from any number of things, including car loans, holiday loans, and payday loans.
- Student debt: Australia’s household debt also includes loans through the country’s Higher Education Loan Program (HELP) for students. When you reach the income threshold, these loan repayments are deducted from one’s salary.
- Credit card debt: Lastly, consumer debt like credit cards only makes up less than 2% of household debt overall. While the sheer volume of credit card debt on an individual basis might be high, it’s not an alarming trend overall.
How Does Australia’s Debt Compare?
Next, how exactly does Australia’s debt compare to other places around the world? While these numbers change annually, Australia has a higher household debt compared to similar nations. Next to Denmark, the Netherlands, and Norway, Australia ranks 4th highest in the world for household debt.
What’s causing these debt levels to rise? While there’s no simple answer, it’s usually linked to lower lending rates and a high level of available debt. There is such a thing as “good debt” and “bad debt.” While consumer debt (like credit cards) are usually frowned upon, more people are open to some types of low-interest debt as a way to build credit, afford large purchases, and finance a home.
Of course, any level of debt leads to a level of risk. Most Australians have a fair amount of “good debt,” and that could put a strain on their families economic situation down the line. It could also impact retirement plans, loan opportunities, and so on. No debt should be entered into lightly, but debt doesn’t have to be a negative thing if you have a healthy financial outlook.
Tips for Managing Your Household Debt
Finally, how does your household debt stack up to the national average? Understanding the data puts things into perspective. You might feel great about your situation, or you might need to take a pause and consider your next steps. Either way, all debts need to be managed in some shape or form.
Here are our top tips for managing your household debt, no matter how large or small:
Consolidate “bad debts” to simplify payments.
Consolidation options are available no matter your credit rating. If you have several credit cards, for example, consolidating them into a single personal loan likely will save you a lot over time. Additionally, it’s much easier to manage. Talk to a Debt Busters professional about your consolidation options.
Save for emergencies.
One of the biggest mistakes people make when it comes to debt is using lines of credit as an emergency fund. In reality, you need a safety net for unexpected costs. When you have money put aside for a rainy day, you don’t have to lean on credit when things get tough.
Have a realistic budget.
Finally, everyone should have a realistic budget. Contrary to popular belief, budgets aren’t just for those struggling to make ends meet. With so many apps and tools available today, there’s no reason to not have a realistic, functional budget that meets your needs.
Yes, it’s true Australia has one of the highest household debts compared to GDP. Still, you can trace most of these back to home loans and investments—and that’s a good thing! If you’re on top of your debt, you have nothing to worry about.
Need help keeping track of deadlines and budgets? Our team is here to help. Contact a member of the Debt Busters team today for a free consultation.