Nervous Australians could change their attitudes toward debt: RBA

The challenging economic environment could lead to Australians are not splashing their cash and building up a nest egg, according to Reserve Bank of Australia (RBA) governor Glenn Stevens.

In a speech this week, the governor claimed that households could be forced to restrain their climbing debt levels.

Mr Stevens stated that during the early 1990s, household gross debt in the country was equal to about 50 per cent of average annual household disposable income.

However, the governor stated that this has climbed to 160 per cent this year.

"The question is whether this long period of gearing up by households might now be approaching an end. Certainly household credit growth is much slower at present than it has been for some years, running roughly in line with income growth," he said in an address to the Australian Institute of Company Directors.

Mr Stevens suggested that there is a good chance that households will seek to contain and consolidate their debt while spending at a rate that was in line with their income.

It is possible that the persistent, widespread reports of a financial downturn means that we are witnessing the early part of a "new phase" that will see the country's household spending and borrowing dynamic change from what it has been in the past 15 years or so.

In other words, the governor is predicting that the days of the average homeowner living beyond their financial means and loading their credit cards with debt could be over.

According to the Herald Sun, economists forecast that the RBA will cut interest rates again next month as it aims to boost growth.

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