The two greatest recessions in Australian history in the 1890’s and the 1930’s occurred after a major increase in household debt. Current Australian household debt is twice the level it was before the recession in the 1890’s and three times the level before the 1930’s. Debt is rising at a rate of $20 billion per month just for borrowing for houses. Unfortunately 90% of house finance is to purchase old houses not new dwellings. Ten years ago 50% of house borrowings were for new dwellings. There are many ways of “solving” the problem but if the government set a target of getting household borrowings back to be mainly for new houses then it would not only solve the housing affordability problem but it will start to reduce household debt and at the same time reduce our need for overseas borrowing.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s