Australian households are stuck in a debt spiral with their debt rising faster than their asset base, according to a new report.
And the possibility of home ownership is slipping from the grasp of more people as property prices rise faster than incomes.
The latest Household, Income and Labour Dynamics in Australia (HILDA) report produced by the University of Melbourne’s Melbourne Institute, found that average household debt rose by 104 per cent between 2002 and 2018 to reach $213,496, while household assets rose 64 per cent to reach $1.37 million.
The rise in debt over the period is largely attributed to property – the percentage of people with a home loan rose from 33.8 to 36.3 over the survey’s 16 years.
Investment property debt was carried by 7.7 per cent of households in 2002, but this had risen to 11 per cent by 2018.
Despite the rise in the numbers of people with mortgages, the rate of home ownership actually fell.
In 2002, 68.1 per cent of people owned a home.
But by 2018 this had fallen to 63.9 per cent, while the proportion of individuals 18 and over fell 4.9 percentage points to 51.9 per cent.
Home ownership has declined through the generations. In the early 1970s, 27 per cent of 25- to 28-year-olds owned a house. The figure was only 16 per cent in 2018.
There has also been an increase in households with mortgages higher than home values: 2.8 per cent in 2018 compared to 1.3 per cent in 2002.
In recent years the decline in home ownership almost stopped, falling only 1 basis point between 2014 and 2018.
Independent economist Saul Eslake said he was not surprised by the HILDA findings.
“The rise in household debt is a result of rising house prices and that is causing the decline in home ownership levels also,” Mr Eslake said.
Income goes backwards
Average household income rose by about $1000 between 2017 and 2018 and income inequality (the difference between the highest and lowest incomes) barely changed over the 18 years of the survey.
However, median incomes, a figure that takes out the highs and lows, actually fell from $81,413 in 2012 to $81,310 in 2018.
That figure tallies with the record low wage growth experienced in recent years. In real terms, between 2003 and 2009 both the mean (average) and median incomes rose about $3000 a year.
However, between 2009 and 2018 the median household income actually fell by $37 to $81,310.
“The fall in median incomes in recent times is caused by wage stagnation following the end of the mining boom [in 2012],” Mr Eslake said.
Wages have barely kept up with inflation since then.”
Household income for single-parent families was hit hard with the average falling from $38,000 in 2016 to $34,000 in 2018.
Get a house buddy
The best way to ensure your wealth grew seemed to be finding a partner.
Those who moved from single to coupled status in a year over the 16-year period saw their wealth jump an impressive average of $466,085.
For those who remained single the rise was only $156,359.
Individuals who decoupled saw wealth grow only by $154,198.
The rise in wealth across society reflected inequality, with 73.1 per cent of people increasing wealth in the four years to 2018 while 26.9 per cent of people suffered a decline.
The Gini coefficient, a measure of inequality, rose from .295 in 2009, to .302 in 2018, meaning inequality rose.
Poverty up recently
Overall HILDA’s measurement of poverty – earning less than half of median income – increased between 2016 and 2018. This relative poverty rate increased from 9.4 per cent to 10.8 per cent of households.
Even so, living standards rose for all Australians, even those counted as living in poverty, except for the final three years of the survey.
In 2001 both the relative and absolute poverty rates sat at 13 per cent of the population. The absolute rate declined significantly to be at 4 per cent in 2017 but rose a little from there.
Children in single-parent families bore a significant brunt of a rise in poverty rates in recent years, with the rate spiking to more than 25 per cent between 2014 and 2018.
At the same time the poverty rate for children in two-parent families fell despite a small initial spike.
People who experienced childhood poverty have greater economic inactivity, more part-time employment and lower hourly earnings as a young adult compared to those who grew up in non-poor households, HILDA found.