The thing is, Australians are supporting more debt and higher house prices to wages even with higher interest rates than the Americans.
Sub prime and ARMs blew up in the USA, which caused their ponzi scheme to explode which actually stopped their boom before it reached our levels, and actually worked as a release valve.
Australia, having no such early release valve, pushed onward ever higher. It is still fundamentally unsustainable and will correct. In a lot of ways, we would have been better off topping early, as we'd have less far to fall.[/QUOTE
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Dear HG,
1. By your own post, it seems to me that apparently you have failed to appreciate the present sound and good basic financial, fiscal or/and monetary regulatory environment in Australia, vis-a-vis those in the US, in the first place.
2. The fact that ARMS /NINJA loans exist in US and has becoming its most prevaient lending practices in the US, in the first place but that such lending practices have still not occured in Australia, will properly testify to these basic differences that are presently prevailing in Australia and in US.
3. Therefore and furthermore, it is also not entirely "accurate" to say that there is no early release safety value in the Australian system at this point in time.
4. The RBA does actually monitor, analyse and conduct detailed studies into the existing "housing stress", levels of loan arrears occuring, and loan default rate etc in Australia, as part of their ongoing real time work in managing the Australian Economy, on a day-to-day basis.
5. Consequently, by RBA's own data, the present loan default rate in Australia, has presently amounted to only 0.3% of all loans reported in the Australian banks' balance sheet as compared to the 4% default rate reportedly against all prime loans made in the US when the global Credit Crunch Crises first broke out in the US in July 2007.
6. Consequently, the RBA further believes that the number of households earning less than A$60,000 per year, in Australia who are truly suffering from the real "housing stress" in Australia , at this point in time, amounts to some 40,000 households.
7. Consequently, the housing stress problem is still officially deemed to be "manageable" by RBA's own standard;- even though the RBA has recently alleged that the extent of the present housing stress problems in Australia, has been greatly exaggerated in the local mass media recently when 750,000-1,000,000 households were reportedly said to be some sort of housing stress.
8. Given the present impact arising from the cumulative rate increases by the RBA , the additiional and higher rate hikes by the commercial banks as well as a general tightening of the credit access in Australia recently, the various (still rising) housing markets in Australia would have already started to slow down/have already slowed down, together with the lower mortgage lending growth figures being reported recently.
9. Consequently, given more time, I would expect that various housing markets in Australia to make its own painful adjustments in due course so as to be more realistically and better supported by its underlying housing market fundamentals, ( rather than positive market sentiments), as well as to eventually slow down to its own soft landing, in the absence of a RBA's direct market intervention into the Australian housing market.
10. For your further comments and discussion, please.
11. Thank you.
Cheers,
Kenneth KOH
