Debt levels remain high among many Australian households, but the latest figures suggest that some effort is being made to address the issue. The Australian Bankers' Association (ABA) revealed that Christmas is when most families rack up their debts, but many people make a concerted effort to repay what they owe over the following months.
Nevertheless, household-related borrowing has increased over recent years. The ABA reveals that the value of these loans stands at $1.5 trillion, which marks a rise of 7.3 per cent on last year's levels.
Credit cards remain a major source of debt for people across the country. A 3.5 per cent increase in credit card limits was witnessed over the past 12 months, and there has also been a 2.9 per cent rise in the total outstanding balance on these cards.
The ABA suggested that these rises could be a direct result of the all-time low cash rate of 2 per cent, which has been in place since May. Households therefore have the confidence to borrow more, potentially putting their finances in a more precarious situation.
As a result, establishing financial agreements could become more popular among couples. These can be established either before or during the course of marriage to give both parties assurances that their financial best interests are considered.
A family lawyer will be able to discuss the issues at hand and help with drawing up the necessary documents. If Australia's debt levels are as high as the ABA data indicates, people may need to put safeguards in place to protect themselves in the event of a separation.
The Australian Bureau of Statistics (ABS) estimates that at the end of 2013, total household debt in the country stood at $1.84 trillion. This equates to around $79,000 for every resident at the time.
Household debt increased at an average of 10 per cent per year from 2001 to 2007, but the rate of growth slowed following the global financial crisis. The average annual rate stood at 2 per cent from mid-2007 to 2013, which the ABS believes could be a direct result of tighter mortgage lending standards.
At present, the ABS argues that the size of Australia's household debt compared to its income is high both not only in historical terms, but also in relation to other G7 countries. Back in 2012, household debt was around 1.73 times Australia's gross disposable household income. However, in the likes of Italy and Germany, it was less than a year's worth.