The growth in household debt and house prices in Australia is unsustainable and the nation must at some stage hit “peak debt’, according to a senior partner in one of the world’s biggest management consultancies.

“In the past ten years our household debt has grown much faster and to a much higher level than it is in places like the the UK and the US where we tend to look at them and say, ‘my goodness, look at that incredibly high level of household debt’,” Michael Rennie, managing partner of McKinsey and Co for Australia and New Zealand, told ABC Radio’s PM program.

“You have to ask yourself, ‘when does it become a problem?’”

Asked about predictions that house prices would double this decade, he said:

“They’re saying they are going to double in the next ten years because of supply and demand: that there’s a lack of supply, and demand is going to increase because of the increase in population in the cities, etcetera.

“But you have to ask yourself, if you look at the research that’s been done over the past couple of years by APRA and others on the percentage of households paying more than 30 per cent [of gross household income on mortgage repayments] which is the comfort level for their mortgages, and incomes aren’t going to double, you’ve got to say somewhere along the line that is all not going to add up.

“We hit peak debt at some point. We hit a level that is well above people’s sustainability.”

A global study by McKinsey and Co is also predicting that the world faces at least five more years of constrained growth as economies “deleverage”, or unwind excessive levels of debt.

Although China will partially insulate Australia, we will not be immune, and it will hit exports.

“About 21 per cent of our goods exports and about 27 per cent of our services exports in the past five years have gone to countries that are going to go through this deleveraging in the next five years,” Michael Rennie says.

His comments come as new estimates from the ABS show a surge in Australia’s population.

More than 450,000 people were added to the population, which grew by 2.1 per cent last year to almost 23 million.

Economists say the rapid population growth will underpin growth in GDP and bolster house prices.

But Michael Rennie argues that, even with the population growth, it is impossible for house prices to keep outstripping incomes.

The growth in population will also add to overall demand and could encourage the RBA to lift interest rates.

“We can imagine this scenario where there is tightening monetary policy ….meaning that people are going to pay more for their mortgages; interest rates are going to go up,” he explained.

“At the same time, you have a supply and demand issue with housing which means the price of houses is going to go up.

“A the same time, incomes are not going to go up at the same level and, at some time, all those three are going to come together and it is not going to be sustainable.”