By Jesse Colombo (This article is frequently updated)
In what seems like a duplicate of (which is part of the Canada’s bubble, Australia’s bubble is based on a China-driven commodities export boom commodities bubble), a severe housing bubble that is larger than the US housing bubble was at its peak, a household debt bubble and global “hot-money” investment inflows. Australian property and stock market investors have convinced themselves that “Australia is different” (aka the rules of economics don’t apply to them) as Australia’s commodities wealth will allow them to ride China’s economic coattails deep into the 21st century.
Australia is rich in natural resources, namely coal, iron ore and agricultural products, all of which have seen soaring demand and record prices due to the China and commodities bubbles. (Afterall, China needs massive quantities of iron ore and coal to make steel for its many empty cities, emptyapartment buildings and wastefully extravagant megaprojects!). Australia’s commodities export boom had led to a powerful bull-market in Australian stocks. The commodities price explosion has led to a Australia’s China-driven commodities-mania means that young high-school dropouts are earning $200,000 per year as mine workers, while a shortage of mining workers has led to desperation for immigrant workers. The employment minister of western Australia, Australia’s mining region, has been seeking to hire Ireland’s unemployed as western Australia has enough job vacancies to employ a third of Ireland’s unemployed. Like Canada, Australia is exposed to the severe risks associated with the popping of the China and commodities bubbles.
Australia’s housing bubble, like its cousin Canada’s bubble, has grown larger than America’s housing bubble in its heyday and is driven by a huge boom in mortgage debt as bubble-blind investors, realtors and economists strongly believe that Australian property prices have reached a permanently high plateau (a very typical belief during bubbles). A researcher recently showed how bubble-denying Australian property investors believe in four key myths to convince themselves that the property market boom is “different” from the U.S. and other nations’ 2000s property bubbles that ended disastrously. While Moody’s says Australian housing prices are not sustainable, U.S. real estate analyst Jordan Wirsz predicts a 60-90% plunge in property prices.
Australia Property Price Index:
Chart Source: GlobalPropertyGuide.com
Throwing all caution to the wind and not learning anything from America’s mistakes, Australians are engaging in debt-fueled splurging.
Like other commodity exporting nations today, Australia’s high-yielding bonds and other investments and perceived economic stability have attracted “hot money” investment inflows from low-yield capital-rich nations, US and Japan, helping to add rocket fuel to their housing and credit bubbles.
Australia is experiencing an obvious economic bubble and is completely ignoring the vital lessons from the U.S.’s economy-ravaging real estate and banking bubble. Nobody should be surprised when Australia experiences Lehman-event of its very own, crashing property prices and a 9% unemployment rate.
Australia Bubble & Australian Housing Bubble-Related Resources:
List of Australia Bubble & Australian Real Estate Bubble Articles (on TheBubbleBubble.com)
Wikipedia: Australian Property Bubble – Comprehensive resource about the Australian housing bubble.
Debtwatch – Australian economist Steve Keen’s website with major focus on Australia’s bubble economy.
Bubblepedia – Website dedicated to Australia real estate bubble news & analysis.
Australian Property Forum – Property forum with strong discussion about the Australian housing bubble.
Popping Bubble – Blog about the Great Australian Housing Bubble.
Who Crashed The Economy – Blog chronicling Australia’s bubble economy.
World Housing Bubble – Blog covering Australia’s housing bubble & other related bubbles.
Brazilian Bubble – Blog covering bubbles in Brazil, Australia & other China-driven economic bubbles.
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