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Families spending 'half of income on debts'

Many families across Australia are spending more than half of their yearly household income on paying debts and credit card bills, a new study has revealed.

According to research by Veda Advantage, 1.3 million Australians spent more than half of their gross household income on paying debts during 2007, while a further 1.8 million used over 40 per cent of their income for debts.

Exposure to debt problems is more prominent in the middle classes, the data shows. A total of 27 per cent of households with an annual income of more than $90,000 are currently spending 35 per cent of that money servicing debts, loans and credit cards.

Veda chief executive officer Rory Matthews said: "It is not just about lower income earners who are feeling the burden of rising interest rates."

"In fact higher income households tend to carry a heavier debt servicing burden. This means those individuals or families are vulnerable to changes in their personal or external financial circumstances.

"Increasing debt can then lead to over-commitment. Households may get by making the minimum monthly repayments but their overall debt continues increasing."

However, the poll did find that overall demand for credit is slowing, with credit card and personal loan enquiries down by 0.2 per cent in the first quarter of 2008, compared with the same period last year.

In March, similar research by Veda Advantage found that 75 per cent of Australians worry whether or not they will have enough money to pay the household bills.

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