New figures show that Australia's debt-to-income ratio more than doubled to 160 per cent from the 1990s to the mid-2000s. Since 2013, that spiked to 190 per cent, taking the economy from a debt ratio lower than two-thirds of advanced economies to the top quarter. Up to 60 per cent of the debt is contained within households where the top income earner is aged between 35 and 54, while an increasing proportion of Australians are carrying it past retirement age. The spiral has been fuelled by a galloping property market driven by Australia's obsession with home ownership and property investment, which has only started cooling in the past year. "Australians borrow not only to finance their own homes but also to invest in housing as an asset, this is different to many other countries where a significant proportion of the rental stock is owned by corporations or cooperatives," Ms Bullock told an Ai Group lunch in Albury. Strong employment prospects and a relatively steady ratio of repayments to income have meant arrears rates on housing loans remain very low, but the RBA warned an economic shock could leave households struggling to meet repayments.

"If they have little savings, they might need to reduce consumption in order to meet loan repayments or, more extreme, sell their houses or default on their loans," said Ms Bullock. "This could have adverse effects on the real economy in the form of lower economic growth, higher unemployment and falling house prices, which could, in turn, amplify the negative shock." The comments come as Prime Minister Scott Morrison puts heat on the big four banks not to increase pressure on homeowners as workers battle low wage growth and high electricity prices. Mr Morrison praised the National Australia Bank for not following the other three major banks in raising interest rates despite the RBA keeping the cash rate at the record low of 1.5 per cent.

Commonwealth Bank, Westpac and ANZ Bank have all raised rates over the past week and a half, arguing the increases were necessary in part to meet higher funding costs. "Good call by NAB not to lift mortgage rates," the Prime Minister tweeted on Monday, escalating commercial pressure on three of the largest companies in Australia. "They seem to get it." The mounting concern over household finances is in contrast with the economic growth story that has been pushed back to the centre of the goverment's strategy in Canberra, where on Monday Mr Morrison faced his first sitting of Parliament since becoming Prime Minister. Coalition strategists are concerned that Australia's overall economic performance, better than any of the world's top seven economies at 3.4 per cent in the year to June, is not being felt by individual households Prime Minister Scott Morrison during question time at Parliament House in Canberra on Monday. Credit:Alex Ellinghausen

The disconnect, which has been reflected in the polls, has triggered a change in rhetoric as Mr Morrison increasingly looks to combine the economic growth narrative with a more tangible increase in social services. "We will keep our economy strong, not just because it gives people a job, what it does is it ensures that the economy that we are generating can pay for the things that really matter," he said in question time on Monday. "It means it can pay for hospitals, education and the National Disability Insurance Scheme. It can pay for life-saving affordable medicines for cystic fibrosis. Those children who had no prospect of a long life and now have the opportunity for that."