The balance sheets of Australian households with a mortgage are dangerously exposed to any fall in house prices.

It isn't just that household debt relative to disposable incomes has reached a record high of 189 per cent, it's that households' ability to service that debt is potentially a ticking time bomb.

If you look at the health of a household balance sheet in the same way as a company's balance sheet, there are two things that come into the picture: the first is the size of the debt against the assets it holds, and the second is the ability to pay interest based on its income.

The main reason the average Australian household balance sheet doesn't look like a crisis in the making is that the asset side of the ledger is healthy because house prices have appreciated enormously.