Debt, home repossessions portent for Australia poll

SYDNEY, May 10 (Reuters) Soaring home repossessions in working class suburbs of Sydney and Melbourne, where elections are won and lost in Australia, may be a dark portent for Prime Minister John Howard as he gears up for a 2007 poll.

Howard has won four elections based largely on his ability to manage the economy, now in its 16th year of growth driven by a global commodities boom and record low domestic interest rates.

But Australia's low interest rates have turned out to be a double-edged sword, creating two separate Australian economies -- one very well-off due to a housing boom and the other struggling under a mountain of debt.

Sydney's tabloid Daily Telegraph, the city's biggest selling newspaper and voice of the working class suburbs, has warned the great Australian dream of home ownership is fast turning into the ''great Australian nightmare'' for many voters.

''The faltering dream of a home in the suburbs does not bode well for a federal government staking its re-election hopes on its economic credentials,'' said the newspaper in an editorial.

Australia's opposition Labor has opened a comfortable lead over the Howard government in opinion polls, ahead of an election expected in late 2007.

MOUNTING DEBT Three small interest rates rises in 2006, rising credit card debt and a dip in housing prices means household debt is now growing faster than assets and many voters are hurting.

''Household debt is now over 165 percent of disposable income, more than double the rate of just a decade ago,'' said Mark Rodrigues, senior economist at ANZ banking group.

''Households now spend a record 11.6 percent of their disposable income servicing debt.'' The Commonwealth Bank said Australians were increasingly looking to credit cards to bridge the gap between their pay packets and the rising cost of living.

''Repayments are moving sideways but purchases are continuing to rise, causing higher debt levels to be left outstanding on cards,'' said the bank in a statement.

A survey by welfare group The Wesley Mission found 40 per cent of Sydney households do not have enough savings to meet an unexpected A2,000 dollars (US1,652 dollars) expense.

Many Australians are declaring themselves bankrupt to escape spiralling debts or are losing their homes in forced sales.

In the last quarter, bankruptcies rose 14 per cent and a study showed a worrying trend towards multiple bankruptcies.

''Some people say the best thing they did was go bankrupt because they don't have to worry any more,'' Mike Young, financial counsellor with Lifeline welfare organisation, told Reuters.

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