Australians are 'maxed out' on credit

Following a volatile week on the share markets blamed on problems in the US home loans market, Mr Symond said the Australian economy was strong but lending criteria had been greatly relaxed as lending institutions competed for business.

"You have a look at statistics with consumer debt - that's home loans, credit cards, car loans, all that - since the 1980s when interest rates hit 20 per cent," he told ABC radio's Sunday Profile program.

"Whilst interest rates have dropped to a half or a third, consumer debt has increased nationally by 400 per cent. Scary. NSW - try 500 per cent.

"So, we're maxed out as a society. We've got too much debt. So every quarter per cent increase hurts so much more than it used to and that's the risk."

Relaxed lending criteria had allowed a lot of people - particularly the young - to borrow as never before, and some will be caught out as interest rates rise, Mr Symond said.

Rising interest rates and debt levels would force lenders to re-examine how they assessed potential borrowers, he said.

"I have been saying for the last three years, young people especially, the most inexperienced segment of the market, (are) taking out loans of $300,000-$400,000 with no deposit and totally inexperienced, and they are more prone to change - start a family, lose an income, interest rates trickle up."

A minority would be caught out as credit tightened and interest rates rose, he said.

"In this case the minority will be people, unfortunately a lot of young people who didn't do their homework, didn't get correct advice, over-borrowed," he said.

"We're a society that, unfortunately, we are better at spending and borrowing rather than saving."