AAP FactCheck Investigation: Does Australia have the second highest household debt in the developed world?
The Statement
“Australia is exposed through having the second highest household debt in the developed world, which is not a record we should not be hankering for or happy with.”
Labor treasury spokesman Chris Bowen. April 10, 2019.
The Verdict
Mostly True - Mostly accurate, but there is a minor error or problem.
The Analysis
AAP FactCheck examined Mr Bowen’s statement that Australia has the second highest level of household debt in the developed world.
The Organisation for Economic Co-operation and Development defines household debt as "all liabilities that require payment or payments of interest or principal by (a) household to the creditor". These liabilities are primarily in the form of loans. [2]
The OECD has no convention for defining “developed” countries, however it states that "Japan in Asia, Canada and the United States in northern America, Australia and New Zealand in Oceania and Europe are considered ‘developed’ regions or areas”. [3]
Mr Bowen's office told AAP FactCheck the source of his claim was taken from Bank of International Settlements data. The BIS is a Swiss-based umbrella group for the world's central banks. [4]
The shadow treasurer based his claim on a BIS table for the third quarter of 2018, which measures household debt as a percentage of GDP across the 34 OECD nations.
AAP FactCheck examined a graph on household debt as a percentage of GDP in an Institute of International Finance table which also placed Australia second in the world behind Switzerland.
Both the Bank of International Settlements data and Institute of International Finance table support Mr Bowen’s claim. [5]
AAP FactCheck looked at graphs by the OECD National Accounts Statistics and Reserve Bank of Australia measuring household debt using the ratio of debt-to-income.
Both graphs placed Australia fourth in the world. Australia was behind Denmark (first), the Netherlands (second) and Norway in the OECD table, and in the RBA graph behind the Netherlands (first), Denmark (second) and Switzerland. [6][7]
AAP FactCheck concludes that using the measure of household debt as a percentage of GDP, Mr Bowen’s claim is correct, while noting that other measurements give a different outcome.
The Verdict
Mostly True - Mostly accurate, but there is a minor error or problem.
The References
1. 'Labor confirms revenue raising measures would start almost immediately’. Radio National, ABC. April 10, 2019: https://www.abc.net.au/radionational/programs/drive/labors-proposed-revenue-measures-to-start-on-july-1/10990526
2: ‘Data. Household debt’. OECD. 2017: https://data.oecd.org/hha/household-debt.htm
3: ‘Glossary of Statistical Terms. Developed, Developing Countries’. OECD. January 4, 2006: https://stats.oecd.org/glossary/detail.asp?ID=6326
4. 'Bank of International Settlements. Total credit to households (core debt)'. Q3 2018: https://stats.bis.org/statx/srs/table/f3.1
5. ‘Aussie household debt: Just the facts’. Switzer Daily, January 24, 2019: http://www.switzer.com.au/the-experts/michael-blythe/aussie-household-debt-just-the-facts/
6: ‘Australians’ household debt nears highest worldwide’. Finder. October 31, 2018: https://www.finder.com.au/australias-personal-debt-reported-as-highest-in-the-world
7. ‘The evolution of household sector risks’. Reserve Bank of Australia. September 10, 2019: https://www.rba.gov.au/speeches/2018/sp-ag-2018-09-10.html
