Aussies struggling to make ends meet are still taking on negatively geared investments, leaving them just as vulnerable as the rich if the property bubble bursts.
A KPMG Economics report analysing data from the past 20 years has found almost two thirds of households pay no net tax, as the amount they fork out is equalled or more than offset by government payments.
The same report also estimates the bottom 20 per cent of income earning households has highest rate of growth in investment income.
Investment income from the lowest fifth of households has grown 8.5 per cent each year, compared with an average of 2.3 per cent over the past decade for other households.
The report notes this growth, along with a significant rise in the value of second mortgages paid by this segment indicates a greater exposure to activities such as negatively geared investment properties.
KPMG Australia chief economist Brendan Rynne says people on low incomes are the worst placed to take on the financial risk associated with geared investments.
“It should be a matter of concern that households across the financial spectrum have been progressively increasing their debt levels at rates faster than their disposable incomes have grown,” he said.
“Any increase in our historically low interest rates would cause serious problems given the growth of outstanding residential loans over the past decade.
“It is clear from our analysis that if the bubble does burst it will not just be the better off who will be directly affected; the poor will be too.”
The KPMG report uses data from the Household Income and Labour Dynamics in Australia 2017 survey, combined with figures from the Australian Bureau of Statistics Household Expenditure survey, covering the years 1998-2010.
THE LUCKY COUNTRY?
* One in 10 households can’t pay bills on time
* One quarter can’t afford an annual one-week holiday away from home
* A fifth can’t pay for entertainment away from home once a fortnight
* One in 10 can’t afford a special meal with family or to buy new clothes
* Up to one in 20 households experience struggle to meet basic needs such as meals and heating
(Source: KPMG Economics report “Financial Stress in Australian Households: the haves, the have-nots, the taxed-nots and the have-nothings”)