Curbing the Persisting issue of the rising household debt in Australia

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ECON1010, sem1 2019
ECON 1010 – Macroeconomics 1
Policy Brief
Part A: Diagnostics Analysis
Name of country: Australia
Indicator 1: Consumer Price Index
Long term
Australia’s annual Consumer Price Index, the overall cost of the goods and services bought
by the typical consumer, rose gradually, correspondingly to the last 50 plus years. This
steady inflation indicates that over all expenses are increasing although the inflation is not
so drastic that goods become unaffordable. The table above indicates that Australians are
spending less money overall on communication, decreasing by 4.6%. Adversely, most
resources are allocated to health, 3.1%. CPI rose 1.3% compared to 1.8% of the previous
year, showing a decrease in inflation rate. This is synonymous with a healthy economy.
Short term
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ECON1010, sem1 2019
This quarter had a no percentage change across all groups CPI, meaning overall the
consumer mustn’t spend any extra money than last quarter. This said, the most dramatic
increase was in education with a rise of 2.7%. As the CPI quarter was flat this means
consumers spent less of their resources on other areas such as transport which decreased by
1.7%. specifically the price of fuel for automobiles attracted less resources. The flat CPI is
a positive result for economy as it means the inflation rate is not insufferably drastic, thus
allowing goods to remain affordable for the average consumer.
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ECON1010, sem1 2019
Indicator 2: Household debt
Long term
https://fred.stlouisfed.org/series/HDTGPDAUQ163N
As the graph above demonstrates house hold debt in Australia increased dramatically
between 2013 and 2016 likely because banks were lending imprudently to people who may
be unable to pay back loans. This meant it was easy for a household to find themselves
drowning in debt, this can lead to major economic issues such as the Global Financial
Crisis. Although, household debt decreased between the years of 2016 and 2018 and again
going into 2019. This is likely because it became harder to receive a loan and fall into debt.
It is critical that an economy not let people take on debts they have no way of repaying.
Short term
In March 2019 lending to households decreased, as banks became more selective regarding
which households could obtain loans, decreasing potential household debt. Seasonally
adjusted household loans declined by 3.7%. Regarding trends in properties, loans for owner
occupied dwellings decreased by 0.9%. Moreover, investment properties fell 2.1%. There
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