Debt Warning Issued by Prime Minister
Concerned about mounting levels of Australian personal debt, Malcolm Turnbull has cautioned the population against borrowing large sums of money.
The prime minister insisted that while he doesn’t want to tell Australians what they should and shouldn’t do with their money, they should be “prudent” despite record low interest rates.
“It’s not for me to give lectures on household finance but I think most Australians are very alert to the fact that while interest rates are low they haven’t always been low and that you’ve got to be prudent in terms of your borrowing,” Turnbull told The West Australian newspaper in an exclusive chat commemorating his first year in office.
It might seem strange for Mr Turnbull to worry about individual debt levels which his own government owes money, but personal debt is a significantly larger problem. The national government’s debt stood at $406 billion in late January, far less than the $1.45 trillion Australians owe the country’s banks. Debt is also taking up a growing slice of household incomes in response to falling interest rates.
Recent figures from the Australian Securities and Investments Commission show 26 percent more interest-only mortgages were sold by Australian banks in the last three months. This comes despite regulators cracking down on banks issuing mortgages that put its consumers at risk.
That’s not to say that Australians shouldn’t take advantage of record low interest rates.
Getting out of the rental market is an excellent way to build personal wealth and housing offers consistently strong returns for investors. However, you should be realistic about what you can afford and resist the temptation to borrow more than you can comfortably repay.