The Sovereign Debt Debacle – Phase 2 of the GFC ?

It is often said that the Global Financial Crisis (GFC) was caused by defaults on sub prime loans in the United States. Such defaults were merely symptoms of the underlying problem, rather than the cause, which of course was the over accumulation of debt by both businesses and consumers alike. Although investment markets have since seen significant appreciation since March 2009, it is now perhaps timely to review what, if any, improvements have really been made in the battle against the pernicious debt burden.

Household Debt in Australia

From an Australian perspective, household debt has only continued to increase, buoyed by a combination of first home buyers grants (now concluded), favourable domestic economic conditions and relatively low interest rates (now increasing). It is clear then that the Australian consumer has not really learned any lessons from the GFC and has not yet started to deleverage in any shape or form.