Can Australia weather a housing downturn?
CIO MONTHLY | NOVEMBER 2018
There's little doubt that housing will drag on the growth outlook for 2019. But is the unfolding correction a more familiar periodic headwind to year-ahead growth - or will it bring a more sinister credit crunch that brings the economy to its knees?
Growth in home lending and building activity has historically been the 'tail that wags the dog' as far as Australia's growth cycle (and sentiment) is concerned. Yet, much debate rages over whether the unfolding correction in housing is a more familiar periodic headwind to year-ahead growth - or critically, whether it will drive a more sinister (potentially systemic) credit crunch that brings the economy to its knees. Will we see household wealth, household prices and housing activity correct to multi-decade lows in the year ahead?
This month, we canvas both the 'sanguine' and more 'bearish' viewpoints on Australia's residential outlook. For the record, we see housing as a potentially long-lived headwind that will constrain Australia's growth to no more than trend over the coming couple of years.