Australia’s own sub-prime housing stress

Sharp rises in housing costs have thrown 425,000 relatively poor Australian families into financial stress.

This is revealed in a new report, just released by the Australian Institute of Health and Welfare.

The Institute confirms that most Australian family budgets look bright, with their gross mid-level incomes rising by no less than 34 per cent, in real terms, over the 10 years to June 2006.

But it warns, too, that Australia is a very diverse country, with a very diverse community.

Its report notes, in particular, that sharp rises in rents house prices, over the past decade, have pushed thousands of families, with relatively low incomes, into severe financial stress.

It is widely accepted, that housing costs produce stress, when they exceed 30 per cent of a family’s disposable income.

John Howard made much of his “battlers.” That was one of his favourite descriptions of poorer Australian families.

The Institute looked at what had happened to them, on Mr Howard’s watch. Massaging figures produced by the Australian Bureau of Statistics, it came to the conclusion that some 425,000 Australian families, with incomes somewhere in the bottom 40 per cent, now spend more than 30 per cent of their income each week, on either rent or home loan repayments.

Default levels, on Australia’s home loans, are still low. That’s because Australia’s banks and other home lenders have been much more careful than their American counterparts, in choosing their customers.

But, if the Institute is right – and there is no reason to doubt that it is – thousands of Australian families are, already, finding it very hard, indeed, to keep a roof over their heads.

The Institute reports, for example, that almost half of all Australian families, in this income range, who rent privately, now pay more than 30 per cent of their gross income to their landlords each week.

That might well have had something to do with the outcome of the Federal election on November 24. The result, in fact, might well be seen as the battlers’ revenge.
The report, the latest in a series published every two years, is close to essential reading for financial advisers.

Its available at www.aihw.gov.au. The data on financial stress is in table 8.5.