Using nominal gross domestic product, Barclays estimates household debt at 130 per cent of GDP, which is the highest level on record. Photo: Rob Homer

Australian households awash with debt: Barclays

Australian households are the most indebted in the world, according to research by Barclays, which warns that the country would be vulnerable in the event of another global financial shock.

Barclays chief economist for Australia Kieran Davies says private sector debt-to-income gearing is currently at an all-time high of 206 per cent, up from a pre-global financial crisis (GFC) level of 191 per cent. This put Australia just within the top 25 per cent of the world when it comes to leverage.

However, when it comes to household debt – which includes mortgages, credit cards, overdrafts and personal loans – Australia leads the global field, according to Mr Davies, with credit continuing to pile up while the rest of the developed world is paying it down.

Using nominal gross domestic product, the bank estimates household debt at 130 per cent of GDP, which is the highest level on record.

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A hydraulic fracturing drill rig in Pennsylvania. Fracking involves injecting huge amounts of water, sand, and chemicals at high pressure thousands of feet beneath the earth’s surface to extract reserves of natural gas. EPA/JIM LO SCALZO

21st century themes: Shale

March 2015

For a long time, mining engineers pondered how to extract the huge amounts of oil and natural gas that are trapped in layers of sedimentary rock. They found the answer eight years ago; horizontal drilling and hydraulic fracturing or fracking, whereby pumped water breaks up reservoir rock and allows the gas and oil to escape and be captured. Thus began the shale revolution, the biggest catalyst for change in energy markets for decades.

The revolution is centred in the US because, while there are large shale-gas reserves around the world, it’s only there that everything is in place for shale-gas production to boom in coming years. That “everything” includes a big natural-gas market, extensive pipeline infrastructure, technical know-how, ample water and favourable tax and regulatory regimes. China, for example, has large shale reserves but lacks the water and technical know-how to frack it out while Europe is beset with policy restrictions.

Thanks to fracking, the US arrested years of declining oil production and boosted output enough to become a net exporter of refined oil products for the first time in 60 years[1] – fracking is even leading to the end of the ban on crude oil exports in place since 1975 as exceptions are being allowed.[2] Statistics from the US’ Energy Information Administration show that US crude oil production averaged 8.5 million barrels per day in July 2014, the highest monthly output in 27 years and about 3.5 million barrels a day more than in 2008. Thanks to fracking, the US dream of energy independence no longer looks a fantasy.

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