ECON203/ECON405 - Banking and Finance

Assignment Task

Read the article below and write an essay on the following:

1. The effect of the RBA’s role on the Australian housing market in recent times

2. How has household debt contributed to the level of risk discussed in the article over the years?

3. What is your view on the RBA Governor's justification of consecutive interest rate increases?

4. What is your assessment of the economists’ view?

IMF warns Australian housing market at high risk of mortgage defaults ahead of global economic downturn

The level of risk in Australia's housing market is the second-highest in the developed world, the International Monetary Fund has warned.

Using a range of risk indicators, the IMF says Australian households with mortgages are at greater risk of defaulting on mortgage repayments due to higher levels of household debt, rising interest rates contributing to higher mortgage rates, and elevated house prices.

The IMF also warns that economies with higher house prices and household debt are "particularly vulnerable" to any stresses in the financial sector, although it notes that banks are better capitalised than they were during the global financial crisis.

However, the IMF's warning comes as some economists say the recent significant declines in Australia's property prices may have ended and the local housing market could rebound from here.

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