With the latest Reserve Bank data showing Australia’s household debt has soared to an all-time high 190.4% of household disposable income:
Which followed separate Bank for International Settlements data showing Australia’s household debt is the second highest in the world and easily the highest in the Anglosphere when compared against GDP:
Australia’s real estate treasurer, Scott Morrison, has admitted that the Australian government, and indeed the entire Australian economy, is now captive to the housing bubble. From The AFR:
Treasurer Scott Morrison said on Monday that he was confident this year’s APRA crackdown on interest-only loans to property investors would ensure a “safe landing” by encouraging households to reduce their overall debt levels.
“There’s a lot at risk,” Mr Morrison said of the property market and current debt levels. “A hard landing in our housing market would have a quite devastating effect on our economy”…
Mr Morrison acknowledged the debt load was a key reason the government supported moves in April by the Australian Prudential Regulation Authority and Reserve Bank to launch a fresh crackdown on interest-only lending, particularly to investors.
“This is the reason why we do these things,” Mr Morrison told Sky when quizzed over the soaring debt-to-income ratio.
“I don’t get alarmed about these sorts of things, I just keep focused on the policies that are needed to add to some stability, add some measure”…
“More people taking on debt which they’re going to repay – not just the interest – that’s what we want to see more of in the economy.”
Asked whether he was comfortable with how the housing market was tracking, Mr Morrison said the data was “an endorsement of the careful approach the government has been taking”.
An alternative to the regulatory restraints on lending, he said, would have been Labor’s curbs on negative gearing.
“That would have driven the market toward a hard landing and we know what that would mean for the consumer confidence in the economy more broadly.”
For years, Scott Morrison and his masters in the property lobby told us that negative gearing and the capital gains tax (CGT) discount did not push up house prices nor make housing less affordable for younger Australians. They even claimed on a few occasions that negative gearing helped lower house prices by boosting supply, and to remove it would make housing affordability even worse.
Now we have Morrison warning that Labor’s negative gearing and CGT policy would cause a “hard landing” in the housing market that “would have a quite devastating effect on our economy”.
Maybe if the Coalition had cracked down on rorts like negative gearing and the CGT discount early in their term, as well as implemented anti-money laundering rules (as promised by the Coalition more than a decade ago) and properly enforced rules on foreign buyers, then house prices and household debt would never had reached such extreme levels?
Instead, the Coalition has more or less backed the bubble from the sidelines and watched as it grew to historic proportions. Now the bubble is so big and has become the economy’s key driver that the Coalition is helpless to do anything that will deflate it for risk that it will crash the economy.
Scott Morrison and the Government are now captive to the bubble.
