Credit and the economy

A few months ago I wrote this piece about the banking environment and ANZ where I touched on the high level of household debt in Australia. I believe that the high level of debt is a major risk to the economy so I wanted to get an idea of the total amount of Australia debt (owed by households, businesses and government). I stumbled onto a website called which had an interesting chart that I have replicated below.

According to this website, the total Australian debt currently is $6.47 trillion, this is equivalent to $258,000 owed by every man, child and dog in the country. I didn’t verify all the figures from their website but the Federal Government debt and the banking sector debt figures looks accurate. Another way to look at this debt is that it is 3.8x the GDP ($1.7 trillion) of the economy. GDP is akin to revenue so this means we have debt levels which are 3.8x revenue.

The debt chat provides a good segue into an excellent video on credit and debt by Ray Dalio (Bridgewater Capital) which I wanted to share. I think this video presentation gives a good mental model to think about the economy, credit and debt which provides some insight into how our huge debt will be ultimately resolved.

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