What do you think?
Rate this book
Australia: Boom to Bust: The Great Australian Credit and Property Bubble
"How much longer can the China construction boom last?"
“At the height of the Global Financial Crisis, the American banking system was too big to fail. Today, the Australian banking system is too big to save.”
After almost 10 years living abroad, former strategy consultant and GreenRigCo co-founder Lindsay David returns to his native Australia. His years of macroeconomic research suggests that Australia is in the midst of one of the biggest credit and property bubbles in modern Western history—bubbles that are supported by the largest credit bubble in human history, the one that has been brewing in China.
Boom to Bust dives deeply into the plausible collapse of the “Three Pillars” of the Australian Banks, Natural Resources and Real Estate. Lindsay David provides unique commentary on the true state of the Australian economy and identifies major defects in the structures of the Three Pillars. Toxic levels of private sector debt sponsored by Australia's largest banks has managed to flood already-inflated asset classes of the Pillars on the back of a once-in-a-lifetime construction boom and property bubble in China. Compelling data and research suggests that the Australian economy has lost touch with reality and has gambled away its banking system to propel the mining and property markets into unchartered waters.
Powerful Australian property and banking pundits have successfully led Australians to believe that the unusually high cost of real estate is justified. The pundits tell us that Australia is simply “different.” Pundits love to use the word “boom,” but they rarely use the word “bust.” When a country as a whole and its cities lack density alongside a median house price that is more than six times the median household income, there is only one word that can describe the true state of the Australian property sector—bubble. The domestic banking sector in Australia learned absolutely nothing from past economic downturns in Japan, America, Spain and Ireland. Unfortunately, it will suffer the same sad fate that its northern-hemisphere peers did, as history has a good track record of repeating itself. The warnings signs of a toxic Australian credit bubble could not be any clearer—they have simply been ignored.
“At the height of the Global Financial Crisis, the American banking system was too big to fail. Today, the Australian banking system is too big to save.”
After almost 10 years living abroad, former strategy consultant and GreenRigCo co-founder Lindsay David returns to his native Australia. His years of macroeconomic research suggests that Australia is in the midst of one of the biggest credit and property bubbles in modern Western history—bubbles that are supported by the largest credit bubble in human history, the one that has been brewing in China.
Boom to Bust dives deeply into the plausible collapse of the “Three Pillars” of the Australian Banks, Natural Resources and Real Estate. Lindsay David provides unique commentary on the true state of the Australian economy and identifies major defects in the structures of the Three Pillars. Toxic levels of private sector debt sponsored by Australia's largest banks has managed to flood already-inflated asset classes of the Pillars on the back of a once-in-a-lifetime construction boom and property bubble in China. Compelling data and research suggests that the Australian economy has lost touch with reality and has gambled away its banking system to propel the mining and property markets into unchartered waters.
Powerful Australian property and banking pundits have successfully led Australians to believe that the unusually high cost of real estate is justified. The pundits tell us that Australia is simply “different.” Pundits love to use the word “boom,” but they rarely use the word “bust.” When a country as a whole and its cities lack density alongside a median house price that is more than six times the median household income, there is only one word that can describe the true state of the Australian property sector—bubble. The domestic banking sector in Australia learned absolutely nothing from past economic downturns in Japan, America, Spain and Ireland. Unfortunately, it will suffer the same sad fate that its northern-hemisphere peers did, as history has a good track record of repeating itself. The warnings signs of a toxic Australian credit bubble could not be any clearer—they have simply been ignored.
229 pages, Kindle Edition
First published April 6, 2014
7 people are currently reading
30 people want to read
About the author
Lindsay David
3 books8 followersLindsay David is a co-founder of clean technology company GreenRigCo and a former strategy & business development consultant. Lindsay holds an MBA from IMD Business School.
Ratings & Reviews
Friends & Following
Create a free account to discover what your friends think of this book!
Community Reviews
Displaying 1 - 4 of 4 reviews
February 14, 2021
Great outline and reasoning of an unpopular view on the Australian economy. The author discusses the three pillars (Financial Services, Mining, and Mortgages) and the related problems (such as the enormous amount of credit and short-term thinking of mining giants + overall reliance on Chinese construction), backed up by data. I really liked how the author debunked a lot of typical myths and explained why in fact Australia has performed strongly throughout GFC.
The book was written a while ago and the hypothesis is that the economy would have crumbled as early as 2016 had not come to fruition, which may only make biased public stronger in their belief that the Aussie economy is 'different' and that the property prices will 'only go up'. I am actually surprised how smooth and negligible the property market correction in 2020 was and how there is still a huge demand for iron ore from China with the whole Coronavirus situation.
What's frightening to me is that the rates have been cut even more by RBA over time, how the government pushed the property agenda stronger than ever, and how the property prices in Sydney have already climbed to 10x of the median household income. The private debt has increased significantly over several years since the book was written, and the financials of BIG4 are not looking any healthier. Australians are only becoming more and more obsessed with property, including first home buyers whose obsession is to get enough savings to secure a loan at the level of 80% LVR. Everyone from the government to the general public seems to be absolutely blind-sighted to the reality of the situation, producing even more assumptions in line with the confirmation bias (e.g. "after COVID finished, foreigners would rush to buy properties because Australia handled COVID so well").
A shock to the economy may not come for many years, but it is almost inevitable to happen considering what's been going on. There are no ideal countries and it is hard to escape groupthink and bias, but the reality has to be faced eventually. I hope that the author will continue working on this book (new editions would be great). I also hope that the book is read by more Aussies (especially, first home buyers and recent immigrants). It is really short and condensed and one could easily finish it in 2-3 evenings.
The book was written a while ago and the hypothesis is that the economy would have crumbled as early as 2016 had not come to fruition, which may only make biased public stronger in their belief that the Aussie economy is 'different' and that the property prices will 'only go up'. I am actually surprised how smooth and negligible the property market correction in 2020 was and how there is still a huge demand for iron ore from China with the whole Coronavirus situation.
What's frightening to me is that the rates have been cut even more by RBA over time, how the government pushed the property agenda stronger than ever, and how the property prices in Sydney have already climbed to 10x of the median household income. The private debt has increased significantly over several years since the book was written, and the financials of BIG4 are not looking any healthier. Australians are only becoming more and more obsessed with property, including first home buyers whose obsession is to get enough savings to secure a loan at the level of 80% LVR. Everyone from the government to the general public seems to be absolutely blind-sighted to the reality of the situation, producing even more assumptions in line with the confirmation bias (e.g. "after COVID finished, foreigners would rush to buy properties because Australia handled COVID so well").
A shock to the economy may not come for many years, but it is almost inevitable to happen considering what's been going on. There are no ideal countries and it is hard to escape groupthink and bias, but the reality has to be faced eventually. I hope that the author will continue working on this book (new editions would be great). I also hope that the book is read by more Aussies (especially, first home buyers and recent immigrants). It is really short and condensed and one could easily finish it in 2-3 evenings.
October 23, 2014
The book gives details in the three main industries that are mining, banking and real estates. The author writes that too much dependence on these three industries would make the Australian economy much more risky. This is because Australians have high expectations on them with never going-down mining prices and forever going-up housing prices. However, with China's slow growth in its economy and over-leveraged banks, AUS would be in danger and future recession would come inevitably and no one has chances to avoid it.
However, with recession, there might be some good opportunities for diversifying Australian economy. The cost of investment would be reduced with lower currency, encouraging foreign investment into Australia. Also, banks would get a lessen and might lend more money in other industries like clean technology, making Australian healthier.
This book is informative and gives some good examples and evidences to prove the author's idea. Before reading it, I did not have clear picture with mining, banking and real estate industries and their future. After reading, I think Australian possibly is in risk because recession is coming soon. But the drawback is that the examples are hypothetical and figures are insufficient. I really hope that the book could analyse more about why RBA and Big 4 are wrong. As for me, I cannot believe that RBA and Big 4 are defying what is going on in Australian economy. But it might be like what the author said they could not have any space to change the bad conditions currently.
However, with recession, there might be some good opportunities for diversifying Australian economy. The cost of investment would be reduced with lower currency, encouraging foreign investment into Australia. Also, banks would get a lessen and might lend more money in other industries like clean technology, making Australian healthier.
This book is informative and gives some good examples and evidences to prove the author's idea. Before reading it, I did not have clear picture with mining, banking and real estate industries and their future. After reading, I think Australian possibly is in risk because recession is coming soon. But the drawback is that the examples are hypothetical and figures are insufficient. I really hope that the book could analyse more about why RBA and Big 4 are wrong. As for me, I cannot believe that RBA and Big 4 are defying what is going on in Australian economy. But it might be like what the author said they could not have any space to change the bad conditions currently.
November 25, 2014
A decent economic analysis of Australia however one issue that Lindsay does not seem to cover is how to resolve the impending "disaster" that is likely to face Australia over the next few years.
The research on the banking, mining and real estate sectors in Australia is great and case studies where apples are compared with oranges creates some empirical data. Worth a read for those interested in macroeconomic issues
The research on the banking, mining and real estate sectors in Australia is great and case studies where apples are compared with oranges creates some empirical data. Worth a read for those interested in macroeconomic issues
April 28, 2017
Good insight into Australian property bubble and indicators to avoid disaster
I just completed reading this book today, and I cannot agree more with Lindsay on the current the current property Bubble Australia is going through. I had to justify this is absolutely a good read.
The book is well researched, I have first hand experienced the GFC in U.S. and the property Bubble Japan and also the U.K. I can see similar activity in Sydney. When linked with true economic indicators, I am able to understand the early warnings to see as we go into a correction. Although it has taken a bit longer than expected for this correction to take place, the warning signs are up on the wall, and Lindsay has taken time to join the dots and explain it to a reader in plain English. The scenarios described shows my experience and can draw parallels in Singapore on how property developers can suddenly pull-out in an uncontrolled market, same goes to the Australian scenario - and I can very well relate from my recent observations at the auctions.
All in all, a good read if you want to understand how the current Australian Bubble takes shape, and to understand in comparison to other Property markets collapsed elsewhere in the world. Property Bubbles don't happen overnight, it takes time, and there's a lot to learn from historically similar events that occurred in other parts of the world.
I just completed reading this book today, and I cannot agree more with Lindsay on the current the current property Bubble Australia is going through. I had to justify this is absolutely a good read.
The book is well researched, I have first hand experienced the GFC in U.S. and the property Bubble Japan and also the U.K. I can see similar activity in Sydney. When linked with true economic indicators, I am able to understand the early warnings to see as we go into a correction. Although it has taken a bit longer than expected for this correction to take place, the warning signs are up on the wall, and Lindsay has taken time to join the dots and explain it to a reader in plain English. The scenarios described shows my experience and can draw parallels in Singapore on how property developers can suddenly pull-out in an uncontrolled market, same goes to the Australian scenario - and I can very well relate from my recent observations at the auctions.
All in all, a good read if you want to understand how the current Australian Bubble takes shape, and to understand in comparison to other Property markets collapsed elsewhere in the world. Property Bubbles don't happen overnight, it takes time, and there's a lot to learn from historically similar events that occurred in other parts of the world.
Displaying 1 - 4 of 4 reviews