{"id":14739,"date":"2017-01-30T00:02:36","date_gmt":"2017-01-30T05:02:36","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=14739"},"modified":"2017-01-30T00:02:36","modified_gmt":"2017-01-30T05:02:36","slug":"bis-high-household-debt-kills-growth-macrobusiness","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2017\/01\/30\/bis-high-household-debt-kills-growth-macrobusiness\/","title":{"rendered":"BIS: High household debt kills growth | Macrobusiness"},"content":{"rendered":"<p>From <a href=\"http:\/\/www.macrobusiness.com.au\/leith-van-onselen\/\"> Leith van Onselen<\/a>, reproduced with kind permission from Macrobusiness:<\/p>\n<p>Last month I <a href=\"http:\/\/www.macrobusiness.com.au\/2016\/12\/australia-takes-bronze-global-household-debt\/\">showed<\/a> how Australia\u2019s ratio of household debt to GDP had hit 123% of GDP \u2013 the third highest in the world \u2013 according to data released by the Bank for International Settlements (BIS):<\/p>\n<figure><a href=\"http:\/\/www.macrobusiness.com.au\/2016\/12\/australia-takes-bronze-global-household-debt\/screenhunter_16670-dec-13-07-13\/\" rel=\"attachment wp-att-778369\"><img data-recalc-dims=\"1\" height=\"660\" width=\"240\" decoding=\"async\" class=\"alignnone\" src=\"https:\/\/i0.wp.com\/www.macrobusiness.com.au\/wp-content\/uploads\/2016\/12\/ScreenHunter_16670-Dec.-13-07.13-240x660.jpg?resize=240%2C660\" alt=\"ScreenHunter_16670 Dec. 13 07.13\"><\/a><\/figure>\n<p>Martin North also compiled <a href=\"http:\/\/www.digitalfinanceanalytics.com\/blog\/household-debt-service-ratio-latest-data\/\">separate data<\/a> from the BIS, which showed that Australia\u2019s household debt servicing ratio (DSR) is also the third highest in the world:<\/p>\n<figure><a href=\"https:\/\/i0.wp.com\/www.digitalfinanceanalytics.com\/blog\/wp-content\/uploads\/2016\/12\/BIS-DSR-Dec-16.jpg\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-15132\" src=\"https:\/\/i0.wp.com\/www.digitalfinanceanalytics.com\/blog\/wp-content\/uploads\/2016\/12\/BIS-DSR-Dec-16.jpg?resize=525%2C258\" alt=\"\" height=\"258\" width=\"525\"><\/a><\/figure>\n<p>Despite record low mortgage rates, Australia\u2019s mortgage slaves are still sacrificing a far higher share of their income to pay mortgage interest (let alone principal) than when mortgage rates peaked in 1989-90:<\/p>\n<figure><a href=\"http:\/\/www.macrobusiness.com.au\/2016\/12\/australia-also-takes-bronze-household-debt-servicing-burden\/screenhunter_16672-dec-13-11-05\/\" rel=\"attachment wp-att-778466\"><img data-recalc-dims=\"1\" decoding=\"async\" class=\"alignnone\" src=\"https:\/\/i0.wp.com\/www.macrobusiness.com.au\/wp-content\/uploads\/2016\/12\/ScreenHunter_16672-Dec.-13-11.05.jpg?w=525\" alt=\"ScreenHunter_16672 Dec. 13 11.05\"><\/a><\/figure>\n<p>Now the BIS has released a <a href=\"http:\/\/www.bis.org\/publ\/work607.pdf\">working paper<\/a>, entitled <em>\u201cThe real effects of household debt in the short and long run\u201d<\/em>, which shows that high household debt (as measured by debt to GDP) has a significant negative long-term impact on consumption and growth. Below are the key findings:<\/p>\n<blockquote>\n<p>A 1 percentage point increase in the household debt-to-GDP ratio tends to lower growth in the long run by 0.1 percentage point. Our results suggest that the negative long-run effects on consumption tend to intensify as the household debt-to-GDP ratio exceeds 60%. For GDP growth, that intensification seems to occur when the ratio exceeds 80%.<\/p>\n<p>Moreover, the negative correlation between household debt and consumption actually strengthens over time, following a surge in household borrowing. What is striking is that the negative correlation coefficient nearly doubles between the first and the fifth year following the increase in household debt.<\/p>\n<\/blockquote>\n<p>As shown in the table above, <strong>Australia\u2019s household debt-to-GDP ratio was 123% as at June 2016<\/strong> (higher now) \u2013 <strong>way above the BIS\u2019 80% threshold by which GDP growth is adversely impacted<\/strong>.<\/p>\n<p>According to <a href=\"http:\/\/www.digitalfinanceanalytics.com\/blog\/high-household-debt-kills-real-growth\/\">Martin North<\/a>:<\/p>\n<blockquote>\n<p>This is explained by massive amounts of borrowing for housing (both owner occupied and investment) whilst unsecured personal debt is not growing. Such high household debt, even with low interest rates sucks spending from the economy, and is a brake on growth. The swelling value of home prices, and paper wealth (as well as growing bank balance sheets) do not really provide the right foundation for long term real sustainable growth.<\/p>\n<\/blockquote>\n<p>Another obvious extrapolation is that there could be carnage when mortgage rates eventually rise from current historical lows.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>From Leith van Onselen, reproduced with kind permission from Macrobusiness: Last month I showed how Australia\u2019s ratio of household debt to GDP had hit 123% of GDP \u2013 the third highest in the world \u2013 according to data released by the Bank for International Settlements (BIS): Martin North also compiled separate data from the BIS, &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/thepatientinvestor.com\/index.php\/2017\/01\/30\/bis-high-household-debt-kills-growth-macrobusiness\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;BIS: High household debt kills growth | Macrobusiness&#8221;<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[40,45],"tags":[976,1726],"class_list":["post-14739","post","type-post","status-publish","format-standard","hentry","category-australia-nz-countries-regions","category-debt-levels","tag-debt-to-gdp","tag-household-debt"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>BIS: High household debt kills growth | Macrobusiness - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"BIS: High household debt kills growth | Macrobusiness - the patient investor\" \/>\n<meta property=\"og:description\" content=\"From Leith van Onselen, reproduced with kind permission from Macrobusiness: Last month I showed how Australia\u2019s ratio of household debt to GDP had hit 123% of GDP \u2013 the third highest in the world \u2013 according to data released by the Bank for International Settlements (BIS): Martin North also compiled separate data from the BIS, &hellip; 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Australia\u2019s household debt to GDP ratio is the highest in the world, at 125%\u2026","rel":"","context":"In &quot;Australia &amp; NZ&quot;","block_context":{"text":"Australia &amp; NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/thepatientinvestor.com\/wp-content\/uploads\/2016\/09\/screenhunter_15143-sep-28-10-37-660x382.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/thepatientinvestor.com\/wp-content\/uploads\/2016\/09\/screenhunter_15143-sep-28-10-37-660x382.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/thepatientinvestor.com\/wp-content\/uploads\/2016\/09\/screenhunter_15143-sep-28-10-37-660x382.jpg?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":41226,"url":"https:\/\/thepatientinvestor.com\/index.php\/2023\/03\/14\/volatility-how-does-australia-compare\/","url_meta":{"origin":14739,"position":1},"title":"Volatility: How Does Australia Compare?","author":"Colin Twiggs","date":"March 14, 2023","format":false,"excerpt":"Last week we covered suppression of volatility in complex systems and showed how Fed suppression of interest rate has destroyed productivity, causing debt to grow at a faster rate than GDP. Quick Recap The ratio of federal government debt increased to a precarious 121% of GDP at the end of\u2026","rel":"","context":"In &quot;Australia &amp; NZ&quot;","block_context":{"text":"Australia &amp; NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"Federal Government Debt & Non-Financial Private Debt\/GDP","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-03-07-debt-gdp.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-03-07-debt-gdp.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-03-07-debt-gdp.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":11804,"url":"https:\/\/thepatientinvestor.com\/index.php\/2015\/05\/12\/federal-budget-2015-worst-cumulative-deficits-in-60-years-chris-joye\/","url_meta":{"origin":14739,"position":2},"title":"Federal budget 2015: worst cumulative deficits in 60 years | Chris Joye","author":"ColinTwiggs","date":"May 12, 2015","format":false,"excerpt":"Chris Joye (AFR) on the budget deficit: There are two critical differences in 2015 that make Australia's current debt burden [42.2% of GDP] much more troubling than that serviced by previous generations. Back in the 1977 and 1983 recessions, the household debt-to-income ratio was only 34 per cent and 37\u2026","rel":"","context":"In &quot;Australia &amp; NZ&quot;","block_context":{"text":"Australia &amp; NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"International Liabilities of Australian Banks","src":"https:\/\/i0.wp.com\/www.macrobusiness.com.au\/wp-content\/uploads\/2014\/06\/erteq-300x209.png?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":38974,"url":"https:\/\/thepatientinvestor.com\/index.php\/2022\/11\/22\/australias-debt-end-game\/","url_meta":{"origin":14739,"position":3},"title":"Australia&#8217;s debt end game","author":"Colin Twiggs","date":"November 22, 2022","format":false,"excerpt":"We are nearing the end of a thirty year bull market in credit, during which time the overnight cash rate in Australia fell from 18% in 1989 to 0.03% in 2021. Low interest rates enabled households to borrow more relative to their income, with housing debt expanding 4.5 times, over\u2026","rel":"","context":"In &quot;Australia &amp; NZ&quot;","block_context":{"text":"Australia &amp; NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":5855,"url":"https:\/\/thepatientinvestor.com\/index.php\/2012\/10\/28\/australia-household-debt-crisis\/","url_meta":{"origin":14739,"position":4},"title":"Australia: Household debt crisis","author":"Colin Twiggs","date":"October 28, 2012","format":false,"excerpt":"A few days ago I mentioned that Australia is in a housing bubble. The easiest way to gauge this is to compare Australian household debt\/disposable income (DPI) to the US peak before the global financial crisis. After all, household debt is the fuel for a housing bubble. 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Contraction since the GFC has brought US household debt back to 80% of\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/14739","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=14739"}],"version-history":[{"count":0,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/14739\/revisions"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=14739"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=14739"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=14739"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}