The OECD has given a stark warning about the soaring house prices in Australia, highlighting fears that the boom could signal the start of an economic downturn if prices continue to remain unaffordable.
The body assessed the country's overall economic stability as robust and healthy, but warned about the perils of spiralling house prices. They warned that the ever increasing cost of a property could lead to a drop in consumer spending and also lead to people defaulting on mortgage payments.
The report, which was released last week, said that personal and household debt in Australia has reached 'unprecedented highs.' It added that this can have a significant knock-on effect for the rest of the economy.
"A continued rise of the market, fuelled by both investor and owner-occupier demand, may end in a significant downward correction that spreads to the rest of the economy," the OECD said.
The body also highlighted the problems for first-time buyers, particularly for those looking to purchase a property in Sydney. Even though the sharp increase in property prices seems to be slowing a little, the price to income ratio is still considerably skewed.
The OECD, a Paris-based institution, added that the Australian economy is robust enough for banks to cut interest rates even further, making it more affordable for people to take out a mortgage.
The overall fiscal outlook for the country remains largely positive. It predicts that the economy will grow by 2.6% this year, with next year looking even healthier with a growth rate of 3.1%. These figures are in stark contradiction to 2016 when growth slowed.
Last year's annual increase was a weak 2.4% - unusually low for a normally vibrant and reliable economy.
Unemployment is also predicted to fall by 0.3% next year.
