Australia’s household debt is among the highest in the world but it’s like a door slamming in the wind: an initial shock before you realise everything is okay, a new report says.

The household debt-to-income ratio climbed from 167 per cent to 186 per cent in 2015, placing it among the highest in the developed world.

With the housing market cooling in recent months, there are some concerns about household debt.

But HSBC economists Paul Bloxham and Daniel Smith say the debt is much more manageable than it initially appears.

Firstly, unlike the US banks, Australian lenders don’t offer loans to people with bad credit record.

So, the economist say, most of the country’s household debt is held by high income earners.

“High household debt is not in itself a problem, as long as the debt is held by households that can service it,” Mr Bloxham and Mr Smith said in a report on Friday.

They also noted the average Australian mortgage is paid up two-and-a-half years ahead of schedule.

That means if the unemployment rate – which has been low recently – were to rise, Australian mortgagees would have a significant equity buffer to draw down.

The HSBC economists said the recent boom in apartment building has created risk of oversupply, particularly in Brisbane and Melbourne.

However, detached house prices were segmented from the apartments, so the chances an apartment oversupply affecting prices in the wider market were low.

The average loan to valuation ratio – the size of a loan compared to the value of a home – has also been falling, meaning people are borrowing less money from banks to buy their homes.

Mr Bloxham and Mr Smith said Australia’s high household debt wasn’t really as risky as it seemed.

“Overall the risks appear manageable, given low interest rates, solid jobs growth, a favourable distribution of debt and tightened lending standards in recent years,” they said.

However, a controversial report released in March by The Australian Population Research Institute’s Bob Birrell and David McCloskey warned there were “economy wide implications of mortgage debt” at this high level.

“The average level of debt per Australian household (most of which is mortgage debt) is equivalent to 160 per cent of the mean annual income of each household,” the report says.

“A recession or a rise in interest rates would undermine the capacity of mortgagees to service their debt, with profound wider economic implications.”

The report put Australia with the Netherlands, South Korea, Canada, Sweden, Malaysia and Thailand for having debt levels “unlikely to be sustainable” and higher than other developed countries.

AAP

– with Jennifer Duke