Tax settings around housing investment are encouraging Australians to take on too much debt, which Labor says is a worry for the economy.

Labor believes tax settings around housing are a factor behind ballooning household debt, warning it has big implications for the economy more broadly.

The comments came as the global central banking authority, the Bank for International Settlements, cited Australia among a handful of other countries where household debt is on the rise, and where a "financial cycle bust" could be the cause of the next recession.

It notes in its annual report in Australia, Canada, Sweden and Switzerland, household debt rose by two to three percentage points in 2016, to 86 to 128 per cent of GDP.

"Increases in interest rates beyond what is currently priced in markets could weaken consumption considerably," BIS, known as the central bank to central banks, says.

Shadow assistant treasurer Andrew Leigh says the rapid run-up in house prices means Australians are more indebted than ever before.

"That's got big implications for the economy," Dr Leigh told Sky News on Monday.

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"When you have got a lot of debt you don't feel like spending."

Australia had tax settings that encouraged people to take on too much debt.

Tax concessions such as negative gearing and the capital gains tax discount enabled people to take on debt because they could deduct investment losses against wage incomes, Dr Leigh said.

"You can't do that in Britain, you can't do that in the United States."