Yesterday I attended a Capital Economics event with Paul Dales that addressed this question. The presentation first noted the huge over-valuation of property with Sydney and Melbourne 30% above sustainable trend, as well as the huge household debt imbalance we all know. It also noted the high likelihood of further price falls:
In exploring the question would this turn into a financial crisis, Dales noted that the Bank of International Settlements (BIS) sees four typical pre-conditions for such an outcome.
First, credit to GDP is usually above the grey line:
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