In 1990, the average amount of household debt represented less than six months of annual income, according to the Bankwest Curtin Economics Centre study, but has now ballooned to a year and a half.
The director of the Bankwest Curtin Economics Centre, Alan Duncan says households should be careful not to overreach, particularly in a time where the jobs market is unstable and there is speculation about a housing bubble, the ABC reports.
“When you look at those sorts of debt-to-income ratios, with debt rising so much and particularly amongst households that are approaching retirement, that is really something we ought to guard against,” he said.
“I think there is heightened risk, particularly if the disciplines for saving for a rainy day aren't followed as they have been up til the GFC, that you can find some households perhaps getting in too deep and living beyond their means.”
According to the report, the gap between households that save and those that do not is also widening. While households with greater savings do earn more, their savings are still significantly higher relative to income.
“The top 20% of savers only have four times the incomes of those that save least," Duncan said.
“Whereas in terms of savings they have 200 times that amount, so relative to incomes, the inequality in savings is really quite significant.
“That's concerning given the security savings give to households both now and in the future.”
