Australian households have largest debts in the world

Australian households have the world’s biggest debts and would be left exposed in the event of another global financial crisis.

Australia leads the way globally when it comes to household debt, as a result of large mortgages, credit cards and personal loans, according to research by Barclays.

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Barclays chief economist Kieran Davies says Australian household debt averages 130 per cent of GDP, compared to 78 per cent across the advanced world, Fairfax has reported.

“With high levels of leverage by world standards, where debt is concentrated in the household sector, we see this as a vulnerability in the event of another global shock,” Davies said.

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Household debt in Australia is made worse by our preoccupation of buying real estate, compared to other countries.

"Examining the distribution of household debt, Australia has the highest gearing of our large sample of countries, although it was practically a tie with Denmark (129 per cent of GDP)," Davies said.

Households in Switzerland were the second most indebted in the world at 120 per cent, followed by the Netherlands.