Your Parents Paid 17% Interest. You're the One in Trouble.

Series note: Commentary on how decisions are made, who makes them, and what they actually produce.

By Aiden Garrison

Every time rates bite, someone reaches for 1989. That's the year the cash rate hit 17%. It's the number people wave at you to say today isn't so bad. Rates are 4.35%. Stop complaining. Your parents paid 17%.

You think 17% was the worst it's ever been.

It wasn't. Not for the borrower. Not by a long way.

Because a rate on its own tells you nothing. What matters is the rate multiplied by the debt. And in 1989 the debt was tiny.

In 1990, household debt sat at around 68% of disposable income. Today it's around 177%. Australians now carry close to three times the debt they did in 1989, measured against what they earn. That 17% was charged on a small mortgage. Today's 4.35% is charged on one three times the size.

So stop asking what the rate is. Ask how much of your income vanishes to interest.

At the 1989 peak, with rates at 17%, interest ate about 5.7% of household income. Today, at 4.35%, it's already around 5.4% and climbing. The 2023 peak hit 5.9%.

Read that twice. We are already at 1989 levels of pain — at a quarter of the interest rate.

You think that makes today the easy version. It makes it the fragile version. Where it once took a 17% rate to inflict this much damage, today it takes barely four. We've built a system so loaded with debt that it now takes almost nothing to hurt it.

And the fragility only runs one way. When rates are 17%, a one percent rise is a six percent lift in your interest bill. Painful, survivable. When rates are 4% on triple the debt, a one percent rise is a twenty-five percent lift — on a far bigger number. The household today flinches at movements the 1989 household never would have felt. We didn't cure the fragility. We hid it behind a low headline rate.

Now, you'd expect the next line to be that a crash is coming. It isn't.

This country has a crash industry. Someone is always forecasting the great Australian property collapse, and the loudest have been calling it, wrongly, for over a decade. Follow them and you'd have sat out one of the biggest wealth runs in the nation's history. So the word credible matters enormously when someone says they're worried now.

The forecaster I'm thinking of built his name betting against the doom crowd. When one famous investor predicted Australian house prices would fall more than 40%, he offered to bet a hundred million dollars that prices would be higher three years later. He won. He called the small dip before it and the boom after it. He works off what people can actually repay, not ideology.

So here's the reversal that should get your attention. The bears who are always bearish tell you nothing — a stopped clock. But when a man who spent fifteen years correctly betting against the crash callers starts using words like the worst in a century, that's not the usual noise. The bull who turns cautious is worth ten permanent bears.

I don't know where this ends. Anyone who claims certainty is selling something.

What I know is that the 1989 comparison is used to prove today is mild, and the numbers prove the reverse. We've engineered an economy that delivers 1989-level stress at a fraction of 1989's rate. Less room to move. Less margin for error. Than the generation that actually paid 17% ever had.

They paid a brutal rate on a small debt, and the pain was over fast.

We're paying a gentle rate on an enormous one. That pain doesn't end fast.

It's barely started.