Australia: Cracks are appearing in trillion-dollar debt pile- Bloomberg

The Reserve Bank of Australia frequently seeks feedback on the health of the economy. It might want to call the debt counselors soon, as reported on the wires via Bloomberg.

Key Highlights:

•Homeowners, consumers and property investors around Australia are making more calls to financial helplines as three warning signs back up the spike in demand: mortgage arrears are creeping up, lenders’ bad debt provisions have increased and personal insolvencies are near an all-time high.

•Australia’s households are among the world’s most indebted after bingeing on more than A$1 trillion ($766 billion) of mortgages amid a housing boom that’s fizzled out in parts of the country, but still roaring in Sydney and Melbourne. 

•Australians’ private debt has soared to 187 percent of their income, from around 70 percent in the early 1990s, encouraged by low-interest rates. In a November speech, Lowe said that while most households are managing these levels of debt, many feel they are closer to their borrowing capacity than they once were.

•The governor noted Australia’s divergent housing market on Tuesday when the RBA left the benchmark cash rate at a record-low 1.5 percent in its first decision of the year, saying conditions “vary considerably” around the country as prices in some markets continue to rise “briskly.”

•After a seven year bull-run, annual cash earnings at Australia’s big four banks fell last year for the first time since the financial crisis, said PricewaterhouseCoopers. At the same time, their bad debt expenses - which encompass both business and consumer lending - jumped 39 percent to A$5.1 billion, the highest since 2012.