Australians obsessed with the housing market overlook our booming economy blog image

Australians obsessed with the housing market overlook our booming economy

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Australian property investors are consumed with housing market reports. Paying attention to the housing market’s twist and turns has never been more popular as it is in the media and a current topic to talk about among friends and relatives. And maybe rightly so as for most, a property investment is most likely the largest investment they will make in their lives. The high winners, as well as the unfortunate losers, add to the entertaining drama of the housing market which makes for an interesting conversation.

However, this obsession with property held by most Australians also creates some concerns as many think that the housing market represents the state of the broader economy which in many cases it does not.

Cooling of the housing market

The housing market is cooling off with fewer property buyers on the market. National housing prices have fallen by 4 per cent over the past year. However, the broader economy is doing quite well. In fact, the economy appears to be in its best shape for many years.

The Australian unemployment rate is currently at a six-year low of 5 per cent, and job vacancies are at a record high. In addition, according to the latest GDP numbers, we are running at a six-year high of 3.4 per cent in the second quarter.

Global growth is gaining momentum

The improvement in the economy is the result of global growth that has continued to gain momentum after the Global Financial Crisis of 2008. Global growth has bolstered rising commodity prices and positive business conditions which have boosted incomes all over the country.

Furthermore, the budget deficit has been slashed to $10.1b and is the narrowest it has been in a decade. Therefore, ratings agency S&P recently removed Australia from its “negative watch” for its triple-A sovereign rating, a rating it also holds with the other agencies.

While paying attention to the housing market is important, do keep in mind that it does not always represent the state of the broader Australian economy. The low unemployment rate, the rise in commodity prices, and the improved budget position are as important as the housing market, if not more, for the macroeconomic outlook.

Yes, prices of Australian properties in certain areas may have dropped but overall things look okay. There are many countries around the world viewing the Australian economy with jealousy.


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