Did you know that Australians are officially the richest people on the planet?
It’s true, according to Credit Suisse’s latest annual global wealth report.
And yet it’s also true that Australians have some of the highest levels of household debt on the planet, according to the Bank of International Settlements (BIS).
In other words, we’re rich – on paper at least – because we have high house prices.
Yet that appears to be rapidly changing, with prices now falling at one of the fastest rates on record. Nationally they’re down 4.5%, with some analysts suggesting it’s only just beginning, with predictions of much larger falls of up to 25%.
I’ve consistently argued that I wouldn’t be surprised if house prices eventually gave up the 30% gains they made during the COVID period.
After all, what the Reserve Bank (RBA) giveth … by slashing interest rates to 0.1% and promising to hold them there during the pandemic … it can also abruptly taketh away. The 2.5% of hikes this year have added a massive $715 a month in extra repayments for the average borrower.
It’s the sort of shock to the system that drives an economy into recession.
So where to from here?
Well, a lot will depend on how far the RBA hikes. Yet the problem is that the RBA has proven to be as accurate at calling interest rates – which they set! – as my youngest boy is at peeing standing up. Despite his best aim he invariably ends up spraying it all over the walls and floors.
“You promised me you got it in the bowl!” I yell.
“Oops. Sorry Dad” he says sheepishly.
We should enjoy our win – because much like my beloved Melbourne Demons – it ain’t going to last.
Tread Your Own Path!