Falling home prices risk spilling into recession, economists warn
Property developer warns falling home values could trigger recession. The RBA does not currently expect one.
Australia's falling home prices risk spreading beyond the property market. Property developer Nigel Satterley warns this could trigger a broader recession.
If households feel poorer as property values drop, they may cut spending. Such spending cuts could weaken the whole economy.
The Reserve Bank of Australia said the housing downturn will slow growth. It does not currently expect a recession.
Independent economist Saul Eslake agrees a 10 to 15 per cent price fall alone is unlikely to tip Australia into recession. However, AMP Chief Economist Shane Oliver puts the recession risk at around 30 per cent.
This risk rises if the broader economy weakens alongside housing. The concern focuses on the wealth effect.
When people feel richer, they spend more. When home values fall, the opposite can happen.
- 10 to 15 per cent
- Price fall scenario
- Around 30 per cent
- Recession probability estimate
- Nigel Satterley
- Developer warning
- Wealth effect
- Key economic mechanism
Why it mattersIf Australia enters recession, it will determine jobs and wage growth. It will also affect how quickly household debt becomes too much to manage.
AustraliaAustralian households face uncertainty about jobs and spending power as economists debate whether the housing downturn will tip the economy into recession.
✓ Claims checked against the source and corrected before publish. checked 13 d ago
