Consumer stress is significantly overstated by the narrow focus on interest rates according to Deutsche Bank research.

In an in-depth research note on the economics surrounding the Australian consumer, Deutsche Bank's chief economist Adam Boyton rejects the traditional view that consumers are 'suffering' under a high interest rate burden.

Instead, he asserts that the Australian consumer is in a fundamentally strong position given that while the interest rate burden facing Australian households has increased in recent years, the tax burden has fallen significantly thereby lowering overall financial obligations.

Deutsche Bank chief economist Adam Boyton said, "The narrow focus on the interest burden significantly overstates the degree of consumer stress. For too long, commentators have simply looked at interest rate obligations as an indicator of consumer stress. What they have failed to take into account is the fiscal easing through lower tax rates that has offset the increase in the interest burden."

The report combines interest rate and tax burdens to create a broader measure for household obligations.

"When we factor in the significant reduction in the tax burden, the broad financial obligations measure was only a little above its 25-year average in Q2-2010. So by referencing taxes, we can go some way to explain the disconnect between the near record high level of consumer confidence we are currently experiencing and a high interest burden," said Mr Boyton.

The report also looks at the issue of credit growth and its impact on consumer demand.

"While credit growth has been soft - it lags the economic cycle," said Mr Boyton.

"A more useful measure is the acceleration or deceleration in credit growth as it tracks the economic cycle much more closely. We call this the credit impulse and it currently points to above trend consumer demand growth.