The debate around the proposed deficit levy has so far focussed on the economic impact of the Federal Government's debt burden.

However, economists are warning there is a bigger threat to the country's future - the unrelenting growth in household debt.

Consumer group Choice is also warning that borrowers are being offered new home loan products that create huge financial risks for the individual.

The Reserve Bank's decision to leave the official interest rate on hold yesterday at 2.5 per cent no doubt came as a relief to Australians with a share in the country's mounting private debt.

Official figures released yesterday show Australians owe $1.8 trillion to banks and other lenders.

Adjusted for inflation, that is the highest level since 1988, and the equivalent of $80,000 per person.

David Skutenko from the Australian Bureau of Statistics says the figure is not just high in historical terms, but by global standards our debt burden is among the highest in the developed world.

"We often compare household debt with household disposable income and, at the moment in Australia in 2013, it was 1.8 times household disposable income," he said.

"In comparison to the G7 countries such as the United States - 1.1 times household disposable income. The UK - 1.5 times disposable income."

While households in the US and UK having been paying off debts, Mr Skutenko says Australians have merely reduced the pace of their borrowing.

"We have seen in Australia since the GFC tailing off the rise of debt," he added.

That tailing off has been significant.

Household debt per person has increased at an annual rate of 2 per cent since the start of the global financial crisis - between 2001 and 2007 it was growing at an annual rate of 10 per cent.

David Skutenko says the most recent growth rate is more in line with a longer-term trend.

"I would let other economic commentators decide on whether it's sustainable, but definitely moving to more sustainable one would expect," he said.

"But while the household debt is growing at slower pace, it is still growing, and over the past 25 years it's been growing at twice the pace of house prices."

Household debt dwarfs government debt

One economist who is prepared to say whether that is sustainable is Steve Keen.

He says rising private debt is a much bigger problem than yearly government deficits and overall government debt.

"Government debt is trivial in this country. It's of the order of 12 to 14 per cent of GDP in net terms, whereas household debt is of the order of 100 per cent of GDP," he observed.

"Now that interest rates have been dropped as low as they have by the RBA [Reserve Bank of Australia], household speculators are diving into the mortgage market once more and driving up household debt levels."

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Bank of America Merrill Lynch's chief economist for Australia Saul Eslake agrees that private debt is demanding of attention, but he does not think a US-style crisis is looming.

"The key difference between Australian household debt and American household debt, in particular, is that over 72 per cent of Australian household debt is owed by households in the top 40 per cent of the income distribution and they have a greater capacity to manage their liabilities and to meet them than people in the lower part of the income distribution, which is where much of the lending in America before the financial crisis went," he said.

However, while Mr Eslake says the risk of a financial crisis is small, he adds that the slower growth in debt is likely to mean less household consumption and slower economic growth.

"Debt is basically growing in line with income at the moment, it isn't growing at an unsustainably rapid rate anymore, and hence the overall degree of concern we should have about the prospect of a financial crisis any time soon or on American lines is fairly small," he said.

"Concern that it will act as a brake on how fast spending can grow, especially in circumstances where income growth is likely to be fairly weak, is however a very real and live one."

Risky home lending on the rise

Consumer group Choice says the slow growth in total lending seems to be driving financial institutions into riskier lending practices.

In particular, Choice is warning consumers to be wary of three particular practices it says are on the rise: low-deposit loans, family guarantees and 40-year loans.

Choice's Tom Godfrey says these offers mark a big shift in risk-taking behaviour by lenders from the caution exercised after the financial crisis.

"During the global financial crisis people were hard pressed to get a home loan approval unless they had a significant deposit. Now RAMS is offering a low-deposit loan combined with a guarantee that allows you to borrow a staggering 120 per cent of the value of your home," he said in a statement.

"Worryingly, there has been a strong demand for these high-risk loans with one-in-three new home loan borrowers putting up less than the 20 per cent normally required."

Mr Godfrey says having a small deposit often means borrowers are vulnerable to repossession in the event of a personal financial shock, such as losing their job or falling ill, and if they have family members (such as parents) guaranteeing the loan they may lose their home too.

However, Choice says 40-year loans are the most worrying innovation in home lending, leaving home buyers even more vulnerable to rising interest rates.

"The difference between a 30 and 40-year loan on a $300,000 home is $140,800 in extra interest [over the life of the loan]. Repayments are only $4.88 per day more for a 30-year loan, the equivalent to a daily large coffee," Mr Godfrey added.

"The average interest rate for standard home loans over the last 20 years has been 7.6 per cent compared to 5.9 per cent today. Be prepared for rates to go up."