The International Monetary Fund (IMF) will send an economic team to Australia next month to check up on Australia’s housing bubble and the increasing risk it poses to the economy, according to a report in the Australian Financial Review today.
James Daniel who will lead the team next month told the AFR, “My first impression from 30,000 feet is that house prices have gone up a lot in Australia, so that will be a big part of the discussion.”
Another part of the discussion will be what (if anything) the government is doing to prevent the bubble, “Even if you were to take the view that house prices are frothy or overvalued, what is the policy response?”
The Reserve Bank of Australia (RBA), the Australian Prudential Regulation Authority (APRA), and the government has all failed in attempts to get the situation under control. The current government refuses to quarantine tax breaks such as negative gearing and is being passive about foreign investment. The Reserve Bank of Australia tipped fuel on the fire in February, cutting the official cash rate by 25 basis points.
The team is also concerned with Australia’s record high household debt levels, some of the highest in the world, saying, “House prices and household debt are very related.”
Today, The Sydney Morning Herald reports (‘The creeping danger of Australian households’ love affair with credit‘) on figures from the Wesley Mission suggesting almost 40 per cent of Sydney households are now technically insolvent, despite record low interest rates.
» IMF to probe Australia’s record property and debt levels – The Australian Financial Review, 2nd May 2015.
» The creeping danger of Australian households’ love affair with credit – The Sydney Morning Herald, 2nd May 2015.