Australian household debt to GDP – can we make it to 100%?
Posted on 31 March 2010
The RBA released lending and finance data for February today (here). The growth in housing credit remains the highlight – with business credit also looking like it is ready to turn the corner:
Housing has all the feel of a speculative surge -
- with record volumes and clearance rates – for commentary brought to you by your friendly mortgage broker see here
- and the RBA getting progressively more uncomfortable – the governor threatening to takeaway the punch bowl on breakfast television here
- and hedge funds starting to add their own colour – FX Concepts expecting our luck to run out in 2010 here.
We’ll find out soon enough how long the jetpack fuel lasts – in the meantime, any bets on a 100% household debt to GDP by our Winter solstice?
5 responses to Australian household debt to GDP – can we make it to 100%?
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The Australian housing market is a curly one. Clearly overpriced (and overhyped), but with little supply and very resiliant demand.
In hindsight I suspect the FHOG boost last year was a mistake – the government should have used the opportunity to let a little air out of the market, but I guess they were expecting a US-like fall in prices.
Hey Justin,
Hand-outs like the FHOG et al don’t help anyone but the vendor. It’s the purest form of wealth transfer there is.
Still are property prices sustainable from here? History doesn’t offer good odds – notwithstanding the supply constraints. It’s been suggested that the UK property market was pointing to the same dynamic prior to the UK’s recent experience. The key, for me anyway, is that the good times keep rolling re: China’s demand. The RBA is hitting the brake, the trouble begins if commodity demand craters. No signs of that at the moment – latest industrial production indicators are all pointing up – but I remain dubious of a ‘self-sustaining’ recovery. But for the time being momentum is up – with commodity price inflation in the driving seat – gotta roll with the punches…
[...] with household debt to GDP rising from 30% in the early 90’s to nigh on 100% currently (see here) and debt to disposable income sprinting from ~40% to ~160% across the same [...]
I think that what they did was in favor of common people. By increasing lending they just let the economy to stay steady in this recession period. Though the benefit goes in the hand of vendors, I totally agree with you.
Agree that it was intended to help first home buyers – just that the ultimate effect was to push up property prices by at least the amount of the grants. Also take your point that it would have some stabilising influence on the economy – particularly that part of the grant money that was spent on new housing construction.