Housing booms, non-financial wealth and consumption: lessons from the Australian experience

Lance A. Fisher, Glenn Otto, Graham M. Voss

Research output: Chapter in Book/Report/Conference proceedingConference proceeding contributionpeer-review

Abstract

Since a relatively high share of private wealth in Australia is held in the form of housing, we extend the approach of Lettau and Ludvigson (2004) to estimate the transitory component of both financial and non-financial (mainly housing) wealth. We estimate the transitory component of non-financial wealth to be large relative to the transitory component of consumption and find little evidence that private consumption expenditure significantly responds to transitory fluctuations in either total or non-financial wealth. We conclude that Australian households have largely ignored the effect of cyclical fluctuations in house prices on their wealth when choosing their consumption path.
Original languageEnglish
Title of host publicationProceedings of the 35th Australian Conference of Economists
EditorsGarry MacDonald Harry Block
Place of PublicationPerth
PublisherCurtin University of Technology
Number of pages40
ISBN (Print)1740675010
Publication statusPublished - 2006
Externally publishedYes
EventAustralian Conference of Economists (35th : 2006) - Perth
Duration: 25 Sep 200627 Sep 2006

Conference

ConferenceAustralian Conference of Economists (35th : 2006)
CityPerth
Period25/09/0627/09/06

Keywords

  • consumption
  • wealth
  • housing wealth
  • cointegration
  • permanent and transitory

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