Consumers and financial stress

A report published on the Reserve Bank web site – which does not purport to express the views of the bank – claims that Australian households were under no greater financial duress in 2001 than they were in 1994.
The study, by two researchers, divided Australian households into financially constrained and unconstrained, and found that much of the rise in debt during the period between 1994 and 2001 occurred in the unconstrained group. This group also grew during that period.
The researchers found that the rise in debt-to-income ratio that is associated with home ownership was largely a matter of household choice. It was driven by higher household incomes and low unemployment, and did not necessarily indicate a higher level of financial stress.
The study did state, however, that there could be increased financial fragility in households which have exposed themselves to a greater level of property investment.