Australia has become the second most indebted country in the world, the ABC has reported.
Australia’s household debt is now worth 121 percent of the country’s GDP, second only to Switzerland’s 127.8 percent. It would take a year and 79 days of Australia’s total economic output to pay off the debt, excluding interests. Over the past decade, Australia’s debt-to-GDP ratio has grown by more than 40 percentage points.
Australia also comes second in repayments with an average of 15.5 percent of incomes, while Netherlands takes the top spot with 16.6 percent.
JP Morgan warned that over-indebtedness in Australia and across the world could lead to a macro or policy shock in 2019.
Economists also worry that households will be more vulnerable to the looming threat of rising interest rates.
“Remember, the Aussie banks don’t just fund themselves domestically, but they’re active in offshore markets, including short-term money markets in the US,” said Stephen Walters from the Australian Institute of Company Directors.
“So, as the Reserve Bank has made clear, those interest rates in the US are going up, so that means the funding costs for Australian banks are also going up.”