RBA: Falling house prices to drag down consumption

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By Leith van Onselen

For the past year or so, MB has warned that consumption growth will necessarily have to fall owing to crashing house prices, anaemic wage growth, and the mountain of debt carried by Australian households.

The below analysis by Gerard Minack last month said it best. According to Minack, there is historically an inverse relationship between house prices and the household savings rate, meaning as Australian house prices fall, the savings rate will necessarily rise, draining on consumption:

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.