Australian households are under greater financial pressure than previous official estimates indicated.
The addition of debt held by self-managed super funds in Australia to calculations has pushed the household debt to disposable income ratio to almost 200%, one of the highest in the world, according to UBS.
The recalculation has increased Australian Total Household Liabilities by about 3% to $2.466 trillion.
The Australian Bureau of Statistics has been making a number of revisions to historical estimates, including the addition of data from superannuation funds.
The largest change was to incorporate higher levels of debt within Self Managed Superannuation Funds.
The ABS and RBA now estimate total Household Debt to Disposable Income at 199.7%, up 3% on previous estimates, as this chart shows:
“With subdued growth in household income expected to continue this implies household leverage is likely to rise further in the near term,” UBS analysts Jonathan Mott and Rachel Bentvelzen write in a note to clients.
“As a result we expect total household debt to disposable income to peak around 205% before the slow deleveraging process begins.”
Much of household debt is tied up in mortgages. The analyst point to sliding house prices in Sydney this month.
“Pricing data from CoreLogic continues to show that the housing cycle has turned,” they write.
“Home values in Sydney are continuing to slide in January, down 3% from their September highs, while Melbourne has now peaked.
“We expect weakness to continue.”
The analysts say the banks have a challenging outlook as the housing market slows, with net interest margins under pressure from competition and switching from interest only loans to principal and interest.