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- They know that the game is rigged.
- They know that they're the ones rigging it.
- They know that they'll be able to pull out early when the game is coming to an end.
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Our dangerous debt affair
Karen Maley
Published 6:44 AM, 20 Sep 2010
Is our economic future at risk as a result of the huge debts we’ve accumulated to indulge our love affair with housing?
According to a recent report by Goldman Sachs chief economist, Tim Toohey, household debt levels in Australia now stand at an elevated level, both in relation to historic norms, and compared to other countries. For instance, Australia’s debt to household income ratio is higher than in the United States and Spain, and stands at a similar level to the United Kingdom. Only the Netherlands and the Nordic countries have higher ratios.
And, the huge amounts of money we’ve borrowed have largely been spent on housing. According to the report, 62 per cent of debt is in owner-occupied home loans, and a further 27 per cent is in residential investment loans. As the report notes, “that is, 89 per cent of all household debt is directly related to domestic housing. By way of comparison, in 2007, 85 per cent of US household debt was secured against housing.”
Karen Maley
Published 6:44 AM, 20 Sep 2010
Is our economic future at risk as a result of the huge debts we’ve accumulated to indulge our love affair with housing?
According to a recent report by Goldman Sachs chief economist, Tim Toohey, household debt levels in Australia now stand at an elevated level, both in relation to historic norms, and compared to other countries. For instance, Australia’s debt to household income ratio is higher than in the United States and Spain, and stands at a similar level to the United Kingdom. Only the Netherlands and the Nordic countries have higher ratios.
And, the huge amounts of money we’ve borrowed have largely been spent on housing. According to the report, 62 per cent of debt is in owner-occupied home loans, and a further 27 per cent is in residential investment loans. As the report notes, “that is, 89 per cent of all household debt is directly related to domestic housing. By way of comparison, in 2007, 85 per cent of US household debt was secured against housing.”
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So who are the people most likely to snap up investment properties?
Interestingly, it appears that Reserve Bank officials are the keenest investors in rental properties. “We are not sure whether to be relieved or concerned that of the five central bankers who were brave enough to note their occupation on their tax form, all five had an investment property!”, the report says. “Of the 200 occupations classified by the Australian Tax Office, the employees at the Reserve Bank topped the list with respect to their investment property exposure.”
But people working in the medical and banking industries, along with people employed in the property sector also figured prominently as owners of investment properties.
On the other hand, people working in the funeral services industries, and in the hunting and trapping industries, were least likely to own an investment property.
Interestingly, it appears that Reserve Bank officials are the keenest investors in rental properties. “We are not sure whether to be relieved or concerned that of the five central bankers who were brave enough to note their occupation on their tax form, all five had an investment property!”, the report says. “Of the 200 occupations classified by the Australian Tax Office, the employees at the Reserve Bank topped the list with respect to their investment property exposure.”
But people working in the medical and banking industries, along with people employed in the property sector also figured prominently as owners of investment properties.
On the other hand, people working in the funeral services industries, and in the hunting and trapping industries, were least likely to own an investment property.
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