Here’s What Happens When You Buy Homes With Easy Money

28.11.2016 • The Economy

By Vern Gowdie – The Gowdie Letter (Australia) –

The tried and true Aussie approach to sorting out the wheat from the chaff is to apply the, ‘if it looks like it, if it smells like it, if it tastes like it, then it probably is it’ test.

Let’s look at the headlines to see what the economy looks, smells and tastes like.

Budget deficit to grow by $24bn as low wages growth offsets rising coal price

The Guardian, 21 November, 2016

Wage growth hits record low of 1.9pc: ABS

ABC News, 16 November, 2016

Australian household debt hits record high: RBA

The New Daily, 16 November, 2016

Auction clearance rate at 18-month high:

Sydney [property values] had the biggest annual rise with a gain of 10.2 per cent, then came Melbourne with a yearly rise of 7.9 per cent., 24 October, 2016

Something doesn’t look right with these headlines.

Source: ABC
[Click to enlarge]

Wages growth is in decline…registering record lows.

If wages are struggling to keep pace with the cost of living, how can we have Australian household debt hitting record highs, and property prices following suit?

The answer: record low interest rates. The cost of debt is the cheapest in recorded history.

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