“High levels of debt are fine, until they’re not”
“It’s not what you own that gets you into trouble, but what you owe”
- Australia has a low level of total debt compared to other major countries. But while public and corporate debt is low, one area of greater vulnerability is household debt.
- A chronic current account deficit in Australia also means a degree of vulnerability to foreign investor sentiment – although this has been the case for decades.
- While Australia is not without debt risk, it is still relatively low, in part due to the flexibility to cut interest rates further, the buffer the $A provides during extreme shocks, pent up demand in the non-mining parts of the economy and the unlikelihood of a hard landing in China.