While Australia had a significant housing bubble in 2008, large government stimulus prevented it from correcting during the Global Financial Crisis (GFC). A side effect is the Australian Government now requires to grow deficit spending to help support the economy while the growing housing bubble continues to detract from household discretionary spending. Australian’s now pay 6 to 12 times income to afford a basic dwelling.
The Coronavirus Pandemic in 2020 required additional fiscal support.
One observation is the fiscal stimulus delivered in 2008 to offset the effects of the GFC wasn’t a once off event, but was required for every year following the Global Financial Crisis. Given Australian house prices surged some 40 percent during Coronavirus Pandemic, off the back of ultra-low interest rates, it is conceivable the government will need to maintain spending north of 100 billion per annum (4.8% of GDP) just to keep the economy a float. If interest rates were to rise, this figure may have to be higher.