How banks, debt, and feminism are changing society

How banks, debt, and feminism are changing society. By Alan Kohler.

In the 1970s, most families were single income. Now most are double-income, both parents working are needed to pay off the mortgage. Is that really an improvement in living standard? Who benefits?

This is a huge, quiet change in our society. Why is it happening? Because of debt, says [ deputy governor of the Reserve Bank, Guy Debelle, ]. “The rise in debt levels has broadly coincided with the increase in the participation rate of females.” …

Are debt levels higher because more households have two incomes and can afford to borrow more? Or is it (as I suspect) that more women with young kids are working because of the amount of debt the family has had to take on to buy a house?

The data is inconclusive on that but it’s certainly true that housing debt has exploded — from 15 per cent of GDP in 1980 to 95 per cent now. As a proportion of income, total Australian household debt has gone from 50 per cent in 1980 to 200 per cent now.

And it’s also true that a place to live in has become much more ­expen­sive, relative to incomes. In 1980 the capital city house price-to-­income ratio was 2: now it’s about 7. …

The price of houses and the amount of debt required to buy them are changing society. Workforce participation is up because more mothers and more older people (because they still have a mortgage) are working, and so is underemployment because people want/need more hours to service their debt.

And the other way society has changed is that banks dominate the sharemarket, our super, our lives, and when they stuff up, it’s a very big deal.

The banking system provides effectively unlimited credit now, so we’ve  bid up the prices of houses to crazy levels, competing with each other. Is that anyway to live life, working to compete to buy a nicer house? What a waste of human effort. Couldn’t we just build more desirable housing?

Who wins? The interest bills are much larger, so whoever is receiving that interest is winning. It’s good for banks, the people who manufacture the credit (money).