Fears of Australia’s economy going into recession as a result of the US housing price collapse may be unfounded.
According to the International Monetary Fund (IMF), banks are not in danger of going belly-up, with Australian house prices only “moderately” overvalued.
As the IMF says “The results do not produce evidence of a significant over evaluation of house prices”.
Australians can sigh a breathe of relief over the news that puts our economy in relative safety, given the current global credit crisis.
However in Treasurer Wayne Swan’s comments this week, his cautions of “some flow-on effects” for property from the US subprime mortgage debacle, have caused alarm. Indeed though it is nothing in comparison to the wide scale crashes in the property markets of Britain and the US, Australian housing prices remain 5-15% overvalued.
The increasing pressures on Australians paying off hefty mortgages thus continue.
Economics editor Michael Stutchbury is nonetheless optimistic, “the IMF suggests our big banks remain reliant to even a fair dinkum housing bust.”
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