Former Federal Treasurer Peter Costello told a Sydney property forum earlier this month that he believes Australia’s luck is beginning to run out.

Real wages are falling, he told the group. Disposable incomes had “peaked”. Savings were increasing and the economy was slowing as a result.

“People have closed the credit card and opened a bank account,” he said.

Peter Costello. Photo: www.news.com.au

Peter Costello. Photo: www.news.com.au

Mr Costello was quick to point out Australia was still “far” from the threat of a recession. However the current economic uncertainty was taking on the characteristics of a self-fulfilling prophecy as drops in spending caused drops in production and drops in real wages.

“Young people under 50 who have lived through a period of uninterrupted rising incomes are beginning to experience something that’s different.” Consumers, he said, were “anxious”.

Mr Costello echoed current Treasurer Joe Hocky in rejecting speculation of a housing bubble.

Mr Costello put the current high demand for housing down to Australia’s strong population growth. Something, he predicts will continue.

He went a step further, though, by saying “Building a house is comparatively cheap. What is expensive in Australia is land.

“So we have an increasing demand but we have quite a restrictive supply of land. As a result, prices are high.”

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