Household Debt, Consumption, and Monetary Policy in Australia

By Elena Loukoianova, Yu Ching Wong, Ioana Hussiada

April 5, 2019

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Elena Loukoianova, Yu Ching Wong, and Ioana Hussiada. Household Debt, Consumption, and Monetary Policy in Australia, (USA: International Monetary Fund, 2019) accessed October 6, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper discusses the evolution of the household debt in Australia and finds that while higher-income and higher-wealth households tend to have higher debt, lower-income households may become more vulnerable to rising debt service over time. Then, the paper analyzes the impact of a monetary policy shock on households’ current consumption and durable expenditures depending on the level of household debt. The results corroborate other work that households’ response to monetary policy shocks depends on their debt and income levels. In particular, households with higher debt tend to reduce their current consumption and durable expenditures more than other households in response to a contractionary monetary policy shocks. However, households with low debt may not respond to monetary policy shocks, as they hold more interest-earning assets.

Subject: Consumption, Disposable income, Household consumption, Housing prices, Income, National accounts, Prices

Keywords: Consumer debt, Consumption, Debt, Debt exposure, Debt group, Disposable income, Global, Household, Household consumption, Household debt, Household survey data, Housing debt, Housing prices, Income, Monetary policy, Monetary policy shock, WP

Publication Details

Pages:

39
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/076
Stock No:

WPIEA2019076
ISBN:

9781498303767
ISSN:

1018-5941

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