Debt as a source of financial stress in Australian households

Abstract

This paper examines the role of demographic, socioeconomic and debt portfolio characteristics as contributors to financial stress in Australian households. The data is drawn from the most-recent Household Expenditure Survey and relates to 3,268 probability-weighted households. Financial stress is defined, amongst other things, in terms of financial reasons for being unable to have a holiday, have meals with family and friends, engage in hobbies and other leisure activities and general money management. Characteristics examined included family structure and composition, source and level of household income, age, sex and marital status, ethnic background, housing value, debt repayment of various types and credit card usage. Binary logit models are used to identify the source and magnitude of factors associated with financial stress. The evidence provided suggests that financial stress is higher in families with more children and those from ethnic minorities, especially when reliant on government pensions and benefits, and lower in families with higher disposable incomes and housing values. There is weak evidence that Australia's historically high levels of household debt cause financial stress.