Over the past decade, the sharp rise in the gearing ratio suggests that the second group have expanded a lot faster than the first. Response to shocks I would now like to return to the question of whether the rise in household debt will result in a reaction which will be disruptive to the economy.
Some commentators have suggested that the debt to income ratio is now so high that it is unsustainable. If they mean by this that it will start to fall under its own weight, I think that this outcome is very unlikely. It is far more likely that the ratio will continue to rise for some time, even if more slowly.