The OECD warned that the Australian government should prepare for a "hard landing" of the housing market crash.
The Organization for Economic Cooperation and Development (OECD) pointed out in its largest survey of Australia that the possibility of a "significant correction" in the housing market could lead to "financial institution bankruptcy."

"Due to high housing prices and related household debt, Australia's housing market is a source of economic fragility." The OECD warned.

"House prices have fallen since the end of last year, although the decline is still gradual. The current trajectory seems to be a soft landing, but the possibility of a hard landing still exists."

Although the OECD believes that there will be no "direct blow" from a mortgage default,

The Organization for Economic Cooperation and Development (OECD) pointed out in its largest survey of Australia that the possibility of a "significant correction" in the housing market could lead to "financial institution bankruptcy."

"Due to high housing prices and related household debt, Australia's housing market is a source of economic fragility." The OECD warned.

"House prices have fallen since the end of last year, although the decline is still gradual. The current trajectory seems to be a soft landing, but the possibility of a hard landing still exists."

Although the OECD believes that there will be no "direct blow" from a mortgage default,


The report says the loss of personal wealth and loss of confidence in consumers will hurt the entire economy.

"If housing prices collapse, the reduction of personal wealth will affect consumption, including the risk of bank stock prices, which will encourage deleveraging." The report reminded.

"As the house-related expenses decrease, this will put pressure on the entire economy."

Nevertheless, the OECD mentioned Australia’s tolerance for economic shocks and its record of uninterrupted economic development for 27 consecutive years.

"Australians have a very good life, with a high level of welfare including health care and education," the OECD concluded.

If there is a soft landing, the OECD says the Reserve Bank should gradually raise interest rates and the Federal Bank should continue to accumulate fiscal surpluses.

The OECD is concerned that long-term low interest rates may distort the economy, and if low interest rates continue, it may bring further imbalances.

Sydney and Melbourne are undergoing house price corrections, and some areas have appreciated by as much as 2017% in the five years to 5.

Last week, the deputy governor of the Central Bank Guy Debelle also confirmed that if housing prices continue to fall due to credit tightening, interest rates may fall further.

News source: https://www.abc.net.au/news/2018-12-10/oecd-warns-of-housing-downturn-fallout/10599456