One-third of the country -- including battlers' suburbs and some of the wealthiest urban areas -- has entered the danger zone for financial distress, despite signs that economic conditions are improving.
Dunn & Bradstreet found that 33 per cent of postcodes had fallen into the "high-risk" category of financial distress, with Victorian suburbs facing the highest risk of defaulting on debts. This is up 30per cent on the same time last year.
The research, released exclusively to The Australian, lists the Melbourne outer suburb of Frankston North as the postcode with the highest risk of default, followed by two of Sydney's most exclusive eastern suburbs, Bellevue Hill, the home of Ros Packer, and Woollahra, the address of former premier Neville Wran.
Of the 50 most financially stressed suburbs, 29 are in the first-home owners belt, which includes the outer Melbourne suburbs of Chirnside Park, Cranbourne and Carrum Downs and Sydney's western suburbs Mount Druitt and Auburn. These areas have seen a sharp rise in credit obligations since the increase in the first-home owners grant.
Last week's GDP figures showed the economy had gained pace, driven by increased spending on equipment and by households, which helped to make up for falls in private investment.
There are concerns about the next phase in the economic downturn as interest rates start to rise towards the end of the year and the Rudd government's stimulus package starts to wear off.
Dunn & Bradstreet chief executive Christine Christian said the rising risk of loan defaults underlined the potential for the global financial crisis to become a personal credit crisis in many Australian homes. "If you scratch the surface, there are still problems in the economy," Ms Christian said. "As a country, we have amassed a lot of debt. Each person has $160 of credit for every $100 earned. If unemployment rises or interest rates increase, we will see a significant fallout."
Aussie Home Loans chairman John Symond was not surprised some of the nation's top suburbs ranked as the highest risk.
"People overstretch themselves in these suburbs. The wannabes pay the double rent and pay much higher prices going shopping at Woolworths in Double Bay than Blacktown. Many are living on credit," hesaid.
"Between the last recession and now, we have over-borrowed as a nation. Consumer debt has increased 400 per cent and 500per cent for NSW. That is where the risk is."
The Geographic Risk Indicator assesses the likelihood of default on a credit obligation based on demographic data. Those suburbs categorised as a high risk are 340per cent more likely than average to include households that have experienced previous negative credit defaults. The GRI reveals that 33 per cent of suburbs are rated a high risk, with Victoria having the most significant percentage of such postcodes, 46 per cent. This is followed by Western Australia with 35 per cent and NSW with 30per cent.
D&B defaults analysis reveals the path to financial difficulty often begins with defaults on small, non-bank credit obligations before escalating to more significant defaults.
The research finds that individuals who have defaulted on a phone, electricity or gas bill are nearly four times as likely to follow this up with a default on a financial services obligation. Consumers with outstanding defaults are nearly six times as likely to default again, with those who have repaid outstanding debt three times as likely to re-offend.
If consumers default on payments, this can have an adverse impact on small- and medium-sized businesses, which employ half the country's workers. If this sector starts to shake, it will have huge implications for consumer confidence and economic growth.
