I think you raise some valid points worth discussion despite the...

I think you raise some valid points worth discussion despite the Harry Dentist skew of economic outlooks.

Australians have the lowest rate of household savings in the world per capita (i believe this is a fact) and house prices are predicted by many an economist to be heading for a decline over the next 2 years with a range of 15-40% drop. Consumer spending is declining and retail businesses are getting hit hard. IO i guess refers to Interest Only loans being reset by the banks at a minimum of every 12 months to push up their bottom lines hedging against defaults? The USA will continue to raise rates over the next year or so pushing the AUD$ further down and keeping afloat our export markets.

The assumption on defaults soaring i believe is alarmist, how much possibly can rates rise when wage growth is still far behind contributing to inflation (report comes out on wednesday for new data many expect growth but not significant).  The housing market in summary surely could implode, setting off an Australian economic crisis that would be catastrophic.... i dare say it is Unlikely. A steep decline enough for people to jump out of the wood works and buy at 20-30% discount - i believe is more likely in a market with low unemployment and continuing low interest rates. 

Now to the implications for APTs model. Can it handle a minor recession? Well i think it is more likely to be in higher demand as cashflow becomes a concern for consumers. Young adults need clothes, people need dentist appointments, and kids are still getting toys for Christmas. The real risk is the levels of bad debt increasing past the 4-5% margin where people have no fear and take APT for a ride in terms of using it as free money that they are not liable for - i.e. in one term or another  Fraud. 

I do say there is a big discrepancy in how Australians are liable for debt compared to Americans having the ability to 'walk away' from their debt, which should be articulated in a bit clearer detail to see how significant the risks of bad debt are in that market

So again, all these opinions we form are based on assumptions - the assumption that banks will continuously raise outside of RBA tightening or loosening monetary policy
the assumption that it is in the interest of the banks to rather force their customers into default and catch significantly less returns under the pressures of a falling market
and ofcourse the assumption that Australia, or even the world economy will have another crisis/recession

While all this is possible, if this outcome actually happens, there is very few stocks/markets that wont suffer for the same reasons. There is way too many factors to take into consideration if any one were to attempt to prepare for this scenario, buy commodities, buy gold, bury your money in a box in the backyard, but you gotta put it somewhere.

DYOR GLTAH