The report by Ian Ramsay and Cameron Sim analyzed the character and incidence of personal insolvencies over the past 18 years. They discovered that the number of bankruptcies increased from 8552 to 25,970, a rise of over 200 percent compared with a 24 percent rise in the population.
Professor Ramsay said "That rate of increase dramatically exceeds, for example, the increase in population in Australia over the corresponding period.”
While unemployment remains the biggest cause of personal financial difficulties, gambling and the excessive use of personal loans and credit cards also are the culprits.
Ramsay added, "We also document a significant increase in bankruptcy caused by gambling, and again if we look over the last 10 years or so with the growth in internet gambling, it's never been more easy to gamble."
Analyzing the last 11-year period, the report cited that in 2008 about 27.6 per cent of the 21,380 bankruptcies could be blamed on people accumulating huge credit card and personal loan debts, where as in 1997, easy credit was behind 13 percent of the bankruptcies.
He reflected that "What we've seen in this research is more and more people becoming bankrupt because of excessive use of credit among a number of other reasons. In other words there's a family context here, involving children that I think shows the cost of having too easy access to credit.”
Age is another contributing factor. Studies indicate that in 1997, 26.3 percent of bankrupts were aged over 45, while in 2008, 45 percent of bankrupts were above 45 years.
The report has also found an increase in the number of bankrupt people in the professional set up. Managers, professionals and administrators accounted for more than 27 percent of the bankruptcies in 2008, as opposed to only 11 percent in 1999 from these occupations.
The study highlights that bankruptcy is now an issue for parts of the Australian middle class and also the older generation. He stated "This is strong evidence that bankruptcy is becoming more of a middle class phenomenon. Bankrupts are increasingly coming from higher status occupations, have increasing levels of personal income and household income, and have increasing asset and property ownership levels."
With bankruptcy rates running at a pace three times that of the last recession, Ramsay fears that more people will be forced to the wall. Unemployment is likely to rise in the months ahead, and, with many young families struggling under huge mortgages, burdened with credit card debt, the future presents a dismal picture.
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