CHAPTER FOURTEEN
Australia
Could It Follow in Ireland’s Footsteps?
All the countries we have looked at have had property bubbles and banking collapses. When future crises happen, most will involve housing bubbles and banking collapses as well. What housing bubbles are still out there that haven’t burst? Australia was one of the few countries in the world where house prices made new highs following the Great Financial Crisis, and its housing market is in nosebleed territory.
This chapter looks at the Australian housing bubble and how it looks like other countries with housing bubbles: the United States, the United Kingdom, Ireland, and Spain. On the surface, Australia looks like an extremely well-run country with very low public debt. Ireland and Spain did as well and had very low debt-to-GDP levels. However, if you let a housing bubble get out of hand and the state has to intervene to prop up the banks, then the state’s debt levels will balloon.
Let’s dive in and explore Australia’s endgame.
The Lucky Country
As the financial crisis progressed, hand grenades went off left, right, and center, from Latvia to Spain, from Dubai to Hungary. We have covered many of these in this book. Not only that, in 2008 and 2009, there was barely a major economy that did not experience a severe contraction in growth—outright recession in most cases. One glaring exception was Australia. Its GDP on a yearly basis never went negative, and even quarter-on-quarter growth went negative only once, before ...
