Australia’s ratio of income to house prices isn’t exceptional by global standards, says Reserve Bank governor Glen Stevens.
Speaking at the Australian Business in Europe lunch in London, Stevens backed up his comments by citing Australia’s modest house price growth “over the past year or so”.
"There is quite often quoted very high ratios of price to income for Australia, but I think if you get the broadest measures country-wide prices and country-wide measure of income, the ratio is about four and half and it has not moved much either way for ten years,” said Stevens.
"That is higher than it used to be but it is actually not exceptional by global standards."
With reference to the country’s booming mining sector, Stevens explained that Australia has a poor history of managing booms or, as he called them, “periods of prosperity conferred on us by global trends”, and needs to do better this time around.
He added however that householders haven’t been letting the boom talk let them get carried away, and have been budgeting carefully in the wake of the GFC.
"Having taken on quite a degree of debt over the preceding 15 years or so, households have thought better of taking on too much more," he said. "They are saving more than at any time for 20 years or more.”
"So are households in many other countries, of course, but our good fortune is to be making that adjustment against a backdrop of rising income."
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