ABC’s Australia Talks National Survey has recently suggested that the people of Australia have the second largest household debts just after Switzerland.

Ninety percent of 55,000 participants rated household debt as a national issue. On an individual scale, 37 percent find it hard to clear off their own debts.

Professor Roger Wilkins, the deputy director of Melbourne Institute (University of Melbourne) and the survey of Household Income and Labour Dynamics in Australia (HILDA) said that housing debt is doubled since HILDA was launched in 2001 during an interview with ABC.

“So it’s now averaging around about $350,000 for those who actually have mortgage debt, compared with around about $160,000 in 2002, 2001,” he said.

“Even for people who don’t buy and sell a home, and stay in the one place, we’re finding between 30 and 40 per cent of these people are increasing their debt from one year to the next.

“When people are increasing their debt from one year to the next, they’re essentially accessing the equity in their home … people are evidently using that increased equity to fund consumption.”

Professor Wilkins said that consumption can take many different forms.

“It could be renovating the home, it could be going on holiday, buying a new car,” Professor Wilkins said.

Dr Ian Manning from National Economics who also co-authored a reputable book on Australian debt titled Credit Code Red said that banking system are cautious about the new loans and that is their first resort.

“Such things as reducing interest rates as a guaranteed way of increasing demand so that there’s more employment, more housing, more purchase of housing and so forth, that no longer works,” he explained.

The Reserve Bank has been dealing with it the hard way; with three major interest cuts and personal income taxation cuts.

A recent research paper by the experts of Reserve Bank clarifies the changed public behavior towards the rate cuts.

“What this research from the RBA shows is that households that have a higher level of debt, even if they have the same level of wealth overall, are going to have lower levels of consumption,” says Zac Gross, Economics Lecturer from Monash University and former member of the Reserve Bank.

“Several studies from the United States, written after the global financial crisis, found that areas with higher household debts suffered more from the Great Recession,” Dr Gross said.

Australia being amongst the world’s most indebted nations, it comes as no surprise then that we’re not able to spend more. But this is a nation of cautious workers where they are not just trying to save money but also working more. Professor Rachel Ong ViforJ from Curtin University sheds some light on it.

“If you’re aged in your 40s, 50s or 60s and you’ve paid off your mortgage debt then the odds of you leaving the workforce is about four to five times higher than someone in the same age group who still has a mortgage debt burden,” she told ABC.

“A mortgagor who’s in his or her 50s or 60s would increase their odds of staying in employment by 18 per cent for every $100,000 in increase in their mortgage debt.”

And it isn’t just older people working more, women are relentlessly increasing their participation as well.

Since early 1990’s, the employment rate of women has increased from 51% to 61.2% whereas participation by men has declined a bit from 75 per cent to 71.2 per cent.

“The necessity for two income earners in the household has grown quite a lot over time,” Professor Ong ViforJ said.

“It is very difficult to service a mortgage home loan these days if you don’t have two income earners in the family.

“If it’s a single income earner then that person would have to be typically earning quite a lot above the average.”

Usually, higher employment rate of any country is a positive sign for the economy but if there is not enough work, it leads to lower wages growth.

Treasury Department suggested that Australians have become less likely to change jobs with the passage of time.

“It’s associated with more dynamism in the economy, that the economy’s doing more to find better matches between workers and jobs, so if there’s less job changing going on that can be reducing our productivity growth,” Prof. Wilkins said.

Dr Manning believes the debt risk is significant but not extreme at the moment.

“With Australian household debt levels currently plateauing and higher commodity prices lifting export incomes, the nation is currently not at imminent risk of financial catastrophe.”

“Somewhere in orange range, not red,” Dr Manning said.

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Muhammad Asad Roohani is a first year Master of Journalism Innovation student at La Trobe University. You can follow him on Twitter @asaadroohani