Australia's Greek levels of dept - mortgages

Who knows where the Greek debt crisis will end up, but Australia has it's own debt crisis at similar levels of Greece. Think that sounds nuts? Think again. This is private debt, mostly all tied up in mortgages.

But don't tell SSJoe, or Abbott, who as investors in property are both very happy to see Australian property the third most expensive in the world.

Most of that debt is in the form of mortgages. Australian households now hold 90 per cent of GDP in mortgages, or more than 150 per cent of disposable income (see chart). 

The main reason Australian private debt is not talked about as being at ‘Greek levels’ is that the 190 per cent of GDP owed by Greece to its many creditors is public debt. 

Surely private debt is fine, because if people can’t repay it they just lose their homes don’t they? 

Well no, that’s not how national economies work. The history of the global financial crisis, which was followed soon after by the sovereign debt crisis, is that when banks are about to collapse governments step in to bail them out. more