I don't know how this happens in Australia anyway. From what I've seen, using all the banks' and lenders' calculators on their websites, they seem only prepared to lend you at most an amount with a repayment rate of around 60% your after tax income - basically budgeting/assuming my expenses on my behalf, when the reality is, rent aside, I'm capable of saving easily 80% my monthly income. Some calculators did not reduce the total lend amount until I put in $1500+ of monthly expenses...
So unless you lose your job I don't know how people are defaulting unless degenerate alcoholism / gambling population who can't control their spending. Having kids could explain a good chunk of it, but shit...not everyone can afford those either.