RBA housing affordability propaganda soars

By Leith van Onselen

RBA Assistant Governor, Luci Ellis, delivered a speech yesterday to the Australasian Housing Researchers Conference, which included the below chart comparing dwelling prices to incomes across developed nations:

ScreenHunter_17525 Feb. 17 11.28

Australia is somewhere around the middle of the pack of mid-sized countries on this metric.

Similar comparisons of household debt-to-income ratios across countries also put Australia in the middle of the pack.

Oh, Luci. Do you seriously expect the world to believe that the average Australian dwelling is valued at only 4.8 times household disposable income?

CoreLogic claims that the median capital city dwelling was valued at $605,000 as at February 2017.

According to the latest ABS Household Income Survey, the median household disposable income as at June 2014 was only $77,740 at the capital city level:

ScreenHunter_17527 Feb. 17 11.41

If we scale this up by wages growth, this gives a current median household disposable income of $81,742.

Dividing the median dwelling value ($605,000) by the median household disposable income ($81,742) gives a dwelling price-to-income ratio of 7.4 times – nothing like the 4.8 times claimed by the RBA.

What if we look at the regions only, given that the RBA has measured the price-to-income ratio as a whole, not just in the capitals? Even then the RBA’s figures don’t pass the laugh test.

CoreLogic claims that the median ‘rest-of-state’ dwelling was valued at $380,000 as at February 2017.

According to the latest ABS Household Income Survey, the median household disposable income as at June 2014 was only $59,332 at the ‘rest-of-state’ level:

ScreenHunter_17528 Feb. 17 11.51

Scaling this up by wages growth, this gives a current median household disposable income of $62,386.

Dividing the median dwelling value ($380,000) by the median household disposable income ($62,386) gives a dwelling price-to-income ratio of 6.1 times – again nothing like the 4.8 times claimed by the RBA.

In short, the RBA has badly juked the stats, presumably to play-down the extent of Australia’s housing affordability woes.

It has also tried to play down our monstrous debt loads, glossing over the fact that the Bank for International Settlements has ranked Australia’s household debt-to-GDP ratio as the third highest in the world:

ScreenHunter_16670 Dec. 13 07.13

Easily eclipsing other developed English-speaking nations:

ScreenHunter_16671 Dec. 13 07.23

Clearly the propaganda unit within the RBA is working overtime to maintain confidence and juice the bubble.

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