RBA’s Moves May Significantly Hurt Consumer Demand

The Reserve Bank of Australia’s (RBA) attempts to cool the country’s housing market could significantly hurt consumer demand, according to research from Moody’s Analytics.

Australia’s central bank underestimates the tight relationship between consumption and house prices, Moody’s said in a report, noting that housing currently accounts for 55 percent gross household assets, well above the global average. By comparison, housing constitutes 25 percent of U.S. household wealth.

“Consumer spending has steadily accelerated over the past 12 months… a lot of the consumption lift is thanks to rising house prices, and without it, demand could be considerably weaker,” the report said.

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