subscribe to our newsletter
Housing has become ‘largest risk’ to Australia: OECD

Housing has become ‘largest risk’ to Australia: OECD

Australian economic growth is projected to reach almost 3 per cent in 2018, but the possibility of plummeting house prices presents the country’s “largest domestic risk”.

That’s according to the Organisation for Economic Co-operation and Development’s (OECD) June Economic Forecast Summary for Australia report, released on Wednesday.

While pointing to general growth, the report warned against visa policies that “compromise” Australia’s ability to employ from the global talent pool and added that “despite macroprudential tightening” house prices continue to grow.

The OECD commented: “The single largest domestic risk remains the possibility of a large fall in house prices, which could reduce household wealth and consumption, and damage the construction sector, leading to significant job losses.”

As the trend of declining resource-sector investment softens and momentum gathers from outside the resource sector, the OECD believes wage and employment is set to grow, bringing consumer spending with it, while tightening labour and product markets should give inflation a boost.

Predicting a rate rise from the Reserve Bank of Australia (RBA) in late 2017, the report said that higher interest rates should “relieve” some of the pressure incurred by the booming housing markets, but added that high household debt and house prices continued to pose “macroeconomic and financial risks”.

To counter the risks posed by potential overheating the OECD called for “enhanced macroprudential policies”.

Earlier this month the chairman of the Australian Prudential Regulation Authority (APRA), Wayne Byres admitted to alarm bells “going off softly” for APRA in regards to the volume of household debt in Australia and the high price of housing.

[Related: ANZ expects house price growth to ‘slow sharply’

Housing has become ‘largest risk’ to Australia: OECD
mortgagebusiness logo

Latest News

The prudential regulator has outlined why there is often so much divergence between borrowers and lenders over a four-letter word. It’s no...

Personal insolvencies in Australia rose by 5.6 per cent in the 2017–18 financial year, according to new data from the government. ...

Financial sector reviews have not changed the way Australian banks evaluate performance, the Finance Sector Union has told the royal commiss...

Promoted Stories

podcast

LATEST PODCAST: Non-major rate changes, Bankwest focuses on brokers and Westpac leaves SMSF space

Do you expect access to credit to get harder this year?