On Macquarie Regional Radio today, Costello was playing down the effects on the subprime mortgage crisis in Australia.
Costello said he would continue to closely monitor developments in the US, but the Australian situation was “different.”
Data from the Reserve Bank of Australia and the US Federal Reserve would indicate Australians have more house hold debt as a percentage of household disposable income than Americans, and this increase in debt has accelerated at a much faster rate.
The Federal Treasurer said “The default rate in Australia is much, much lower than it is in the United States … In fact, we have one of the lowest default rates in the world. But we do watch what happens in the American economy. . .It’s the world’s biggest economy and it can have effects here.”
This has prompted a response from Australia’s largest debt collector, Prushka, saying the Treasurer is not in a position to comment on default rates due to inadequate data.
“A significant percentage of housing loans are now written by non-bank institutions and, as most are not publicly-listed, their data is not available. These institutions tend to lend to the riskier segment of the market, so would be expected to experience higher default rates.”
Prushka CEO, Roger Mendelson, has previously suggested a National Mortgage Default Register be established, so accurate data on Mortgage Defaults can be recorded.
Lenders are also hiding the true number of repossessions with as many as 75% of sales were with the consent of home owners, hence they were never recorded in court repossession figures. This is often done to avoid advertising the sale as a Mortgagee sale which typically attracts bargain hunters and attract lower prices.
» Economy buffers mortgage crisis – news.com.au, May 15th 2007.
» ‘Inadequate data’ to gauge default rates – NineMSN, May 15th 2007.
» True rate of home defaults hidden – The Australian, May 16th 2007.