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Comment by Clewza313 | Hacker News Reader

Australia has gone 20+ years without a recession, meaning many people have grown up without ever seeing anything except full employment and house prices going up up up. It's thus been a "safe bet" to leverage yourself up to your eyeballs to get on that "property ladder", and while many (including myself) thought this would finally pop last year with COVID, nope, after the briefest hiccup the property market has gone even more nuts this year.

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If you look at interest rates from 1990 to now, and average household debt, it's easy to see why the economy has been up up up up. People have been spending way more money than they make for 30 years in Australia. That will make any economy boom.

The difficult thing is... when does it stop? The above could have been said 10 years ago, just replace the 3 with a 2. Should it have stopped then? Now? In 10 more years?

That type of economy (powered by extreme consumerism beyond the customers’ means) isn’t unique to Australia. It’s only sustainable so long as the target population continues to increase (kind of like social security). The forecasted global population drop that will hit home in the next 15-20 years is going to completely destroy economies propped-up by fake money.

It's not unique, but in the first world Australia has gone from being ranked one of the lowest in average household debt in 1990 to one of the very highest in 2021.

It's not fake money. It's likely not even "beyond means". The debts can likely be paid back. But it seems quite unlikely the level of spending can continue to grow.

It’s fake money in the sense that, assuming people aren’t in over their heads with loans they shouldn’t have been approved for, everyone is fully leveraged at some multiple of their monthly salary. In that regard, the present is fully leveraged taking a debt that the future will have to pay back, and it can only be pushed out indefinitely so long as the economy continues to grow. That’s regardless of GDP: it can be - and this is what people futilely speculate when it’ll hit - because the economy took a turn south (GDP looking only at the working-aged population drops) or, as mentioned above, even if the economy is doing spectacular on a micro level and GDP (again calculated only against working-age population) is up, but there simply aren’t enough cogs in the machine to keep it spinning at the same rate it was before.

I agree that Australia's economy is propped up by continued ion growth, a giant pyramid scheme if you'll excuse the hyperbole.

However Australia has such a large amount of land, and such a small population that forecasted worldwide population drop won't affect Australia so much. It's such a desirable place to live that immigration at the current rates will be sustainable regardless of the rest of the world's population growth rate. Whether or not our cities can keep up with the growth and maintain their high levels of livability is another question.

I'd also question your statement about population drop on the next 15-20 years. All forecasts I have seen are that the world's population will continue to grow until the end of the century. If the world's population were set to start shrinking in such a short timeframe, I'd think it would be a huge talking point in any discussion about sustainability and global warming.

15-20 to start feeling it in the most developed nations, end of the century worldwide. Immigration can stall the former but current policies are not promising. Germany will sing songs of praise in Merkel’s name.

Well the sooner countries can start to transition to an economy that is not reliant on perpetual population growth the better.

I am always amazed at news reports from Japan about how the sky is falling because their population is shrinking. For some reason no one ever says "on the plus side, Japan is one of the most densely populated places on the planet, a slow decrease in population will help improve quality of life measures and sustainability".

In other words, aging society is the problem, and shrinking makes the problem much worse. Fixing the problem in ethical way is difficult.

That's likely a combination of extra money being printed, maybe people doing more remotes and looking for better houses, government schemes to prop the house prices up (eg. by slashing taxes on property).

There is still time for a pop once governments decide things are normal again after covid.

> There is still time for a pop once governments decide things are normal again after covid.

While thats true on its face, in practice trying to make that bet is a fools errand at this point. People have been telling me that for a decade plus, now. It still hasn't happened, and the Australian economy (and household wealth) is inextricable intertwined with real estate -- I can't see any government deciding to let it "pop", personally.

If you were to use one word to describe governance in Australia, it would be reactive.

They won't let it pop, but that doesn't mean it won't. Of course, timing it is the big bet, not predicting if it will happen.

As a naturally risk averse Australian it's been incredibly frustrating. Even 15-20 years ago I was thinking this can't keep going. Turns out I just should've invested everything I own.

People need to be much stricter on what they mean my "pop".

Australian property prices are cyclic with an upward trend. There are (substantial) cyclic decreases in prices, especially in Sydney[1].

But people who talk about "popping" property prices seem to believe there will be a massive (50%+?) fall in prices.

But there are fundamental reasons why this is unlikely. The 2008 GFC causes a 16% decrease in prices in Australia[2], and it's hard to imagine something being worse. Prices recovered 10% the next year, because Australia avoided a recession and there is fundamental demand for living areas in out major cities.

The GFC caused a 18% decreases in prices in the US[3]. Given that Australian mortgage rules are different (there is no ability to walk way from a mortgage in Australia, unlike the US) it's unlikely a bubble in Australia will "pop" worse than that.

But 10% decreases occur relatively often. For some reason these are ignored, but the truth is these are the "pops" that take the froth out of the market.

[1] https://cdn.propertyupdate.com.au/wp-content/uploads/2021/03...

[2] https://www.theguardian.com/money/2009/jan/06/house-prices-f...

[3] https://money.cnn.com/2008/12/30/real_estate/October_Case_Sh...

By "pop", people mean something like the impact of the GFC on many parts of the US, where houses were underwater on their mortgages and getting repossessed left and right.

There's also reason to believe that the Australian property market has decoupled from the rest of the economy, and that's because tax breaks like negative gearing incentivize buying properties even when it makes no financial sense otherwise. This could change overnight with the stroke of a pen, but it would take an awfully bold politician to do it.

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