Australian personal debt and debt/disposable income ratios are now one of the highest in the world.

http://www.bis.org/publ/bppdf/bispap46e.pdf

From the linked paper:
"During the 1980s, the ratio of debt to disposable income for Australian households was fairly
stable at around 45% (Graph 1). But since 1990, this ratio has risen rapidly, reaching 157% in December 2007. Housing debt accounts for the bulk of the increase, with the ratio of housing debt to disposable income rising from 31% to 134% over the period. By comparison, the ratio of personal debt to disposable income increased from 13% to 22% over the same
period. The ratio of debt to assets has also risen sharply over the past two decades, from 8% in December 1989 to 17% in December 2007.
Many advanced economies have witnessed a large rise in household indebtedness over the past two decades. However, the increase in Australia has been particularly pronounced. The ratio of household debt to income in Australia went from being one of the lowest in the advanced economies in the late 1980s to one of the highest in December 2007 (Graph 2). "

It's an older article (frustratingly newer is harder to find) but since 2007 many of the countries in comparison have suffered badly in property value write-downs.

Basically, my point is this : household debt/income ratios are one of the highest in the world. This is mainly because of the most unaffordable property market in the world.

As has been seen in the USA, Spain, Ireland and elsewhere, a breakdown in the property market has very wide implications for the wider economy as much of the current spending has been due to debt spending. As things are the excess income is being channeled towards debt reduction, which in effect is a negative savings rate, which has major implications for things like consumer spending.

Australia cannot remain at the top of the 'most unaffordable housing' and 'highest debt/income' ratios forever. What goes up must come down.

Even a 10-15% drop in housing prices will not only severely undercut consumer and business confidence, it will also undermine the banking sector stability because most of the major banks are heavily weighted towards residential property lending, meaning their capital bases are underpinned by the values of property.

A fall in housing values would wipe out many of the statistics in the parent linked article. Yet people continue to say what happend in Europe and the USA cannot happen in Australia - but I'm yet to hear a convincing economic argument as to why not.

Right now low unemployment and a strong dollar are underpinning teh property market (to some extent) but also so are (quiet) changes to government policy which include allowing banks to package up more residential backed mortgage securities (yes, those very things that brought the USA undone) and sell them to both pension funds and treasury as AAA investments. They have also changed the rules to allow superannuation funds to now borrow and fund purchase of property, something that was strictly prohibited before. Some mortgage brokers have estimated that super-backed borrowing makes up 20% of their business now.

Even a slight fall in house prices and/or income levels will have major ripple effects. Yet this is not being discussed at all, as it is continually hand-waved away with 'oh that's not a problem, this time it is different'.