## Household Debt, Consumption, and Monetary Policy in Australia

_IMF Working Papers, April 5, 2019_

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**Canonical URL:** [Household Debt, Consumption, and Monetary Policy in Australia](https://www.imf.org/en/publications/wp/issues/2019/04/05/household-debt-consumption-and-monetary-policy-in-australia-46685)

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## Bibliographic details
- Authors: Elena Loukoianova, Yu Ching Wong, Ioana Hussiada
- Published: April 5, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498303767.001

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### Overview
- Authors: Elena Loukoianova, Yu Ching Wong, Ioana Hussiada
- Date: April 5, 2019
- Series: IMF Working Papers
- Core focus: evolution of household debt in Australia and the impact of a monetary policy shock on households’ current consumption and durable expenditures conditional on household debt levels.

### Key findings
- Higher-income and higher-wealth households tend to have higher debt.
- Lower-income households may become more vulnerable to rising debt service over time.
- Households’ responses to monetary policy shocks depend on their debt and income levels.
- 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.
- Households with low debt may not respond to monetary policy shocks because they hold more interest-earning assets.

### Methodology and scope
- Analysis includes: evolution of household debt in Australia; empirical analysis of the impact of a monetary policy shock on consumption and durable expenditures across household debt levels.
- Outcomes explored by debt and income groups (debt group, debt exposure).
- Subject tags used in the paper: 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.

### Policy implications and interpretation
- Monetary policy transmission to household spending is heterogeneous: higher-debt households are more sensitive to contractionary monetary shocks.
- Low-debt households’ relative insensitivity is linked to holdings of interest-earning assets, implying asymmetric effects across the wealth distribution.
- Vulnerability of lower-income households to rising debt service suggests policy attention to debt-service burdens and distributional consequences of monetary tightening.

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_Source: https://www.imf.org/en/publications/wp/issues/2019/04/05/household-debt-consumption-and-monetary-policy-in-australia-46685_