What’s the magic ingredient for households to tap equity mate?

Friday, 20 December 2019

As we have noted many times in the recent past, households have stopped spending and started saving. Authorities have been taken by surprise by this, assuming that the welasth effect would kick in quickly with tax cuts lending a hand.

Instead we have seen massive equity injection as households have bunkered:

We see this as structural at the zero bound. Highly indebted households are unhappy with life without the RBA insurance policy. They see low rates as a chance to pay off debt faster.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.