We keep hearing that consumers are not as keen to jump in to debt as they were pre-GFC. The government has a quandary. Investors and speculators are pushing up the home prices but consumers are not as inclined as they once were to spend the equity. Scarred possibly from the GFC maybe treading with caution is the new normal. If that is so we are in big trouble. The RBA's gamble on slashing rates to fuel asset prices and trigger large amounts of spending will fail. It may have the opposite effect and fuel only a dangerous nvestor driven housing bubble.
If the owners of those 40% of new loans written to investors in the past year decide to pull out god help us. We may have to increase negative gearing tax breaks to keep them in the market.
