RDP 2020-05: How Risky is Australian Household Debt? Appendix A: Regression Data

Table A1: Regression Data
Variable Source Unit Measurement
Household debt-to-income ABS; Jordà et al (2013); Thomson Reuters; authors' calculations ratio Disposable income is measured after tax but before deduction of interest payments for most countries, includes non-profit sector; Australian DTI ratio extrapolated three years earlier than ABS data using the Jordà et al (2013) database
Real income per capita OECD; World Bank; authors' calculations US$ Real disposable income per capita; in 2017 dollars, converted to US$ using year-average exchange rate
Real interest rate Bloomberg; IMF; RBA; central banks % Calculated as 10-year nominal sovereign bond yield minus past year's CPI inflation
Inflation IMF % CPI inflation over the prior year
Housing pricing growth BIS; IMF; authors' calculations % pa Growth in BIS long-run housing price series, minus CPI inflation over a three-year period
Max price fall BIS; authors' calculations % Absolute peak-to-trough fall in the BIS long-run housing price series over the prior period; weight on price outcomes is given full weight for the most recent five years, and then gradually declines according to the following formula: ΔP× 0.8 ( t5 ) ;5<t15 , if prices have not fallen during that time, the value is set to 0
Urban population growth United Nations % pa Two-year annualised rate of change in population for cities with at least 300,000 people in 2018
Urbanisation United Nations authors' calculations % Share of national population living in cities that had at least 300,000 people in 2018
Housing stock per person United Nations; authors' calculations; national agencies ratio Total dwellings divided by population
Younger population United Nations; authors' calculations % Share of total population aged 25 years or less
Older population United Nations; authors' calculations % Share of total population aged 65 years or older
Financial liberalisation Abiad, Detragiache and Tressel (2008); authors' calculations index Based on seven metrics of deregulation (credit controls, interest rate controls, entry barriers, state ownership, capital account restrictions, prudential regulation and securities market policy); we update this to 2018 using various sources of information on these metrics
Income growth expectations Consensus Economics % Forecasts for GDP growth in the year t + 1, made in March of year t
Unemployment rate IMF % Unemployed persons as a per cent of the labour force
Baa-Aaa spread Federal Reserve Bank of St. Louis ppt Difference between yield on Baa-rated bonds and equivalent tenor Aaa-rated bond
Ownership of housing authors' calculations; national agencies % Share of all housing owned by households; generally collected from financial accounts data, where that is unavailable then census data are used
Strength of legal rights World Bank index Ranges from 0 to 12, with 12 being the strongest creditor rights
Urban density Charting Transport person/ha Population-weighted density of main cities in each country, calculated using square km grids
Inequality OECD ratio Gini coefficient
Interest tax deductible Ellis (2005); authors' calculations dummy 1 = interest payments are tax deductible
Capital gains taxation Ellis (2005); authors' calculations dummy 1 = capital gains on housing are taxed at full rate
Table A2: Sample Period for DTI Ratios across Countries
Country Sample starts Country Sample starts
Australia 1985(c) Japan(b) 1980
Austria(a) 1999 Netherlands 1980
Belgium(a) 1999 New Zealand 1980
Canada 1980 Norway(a) 1987
Chile(b) 2003 Portugal(a) 1999
Denmark 1999 South Korea(b) 2008
Finland(a) 1999 Spain(a) 1980
France(a) 1980 Sweden 1980
Germany 1991 Switzerland 1999
Ireland(a) 2001 United Kingdom 1980
Italy(a) 1999 United States 1980

Notes: (a) Not included in narrow regression
(b) Not included in narrow or wide regressions
(c) ABS data begin in 1988, DTI ratio is backcast a few years based on data published by Jordà et al (2013)

Figure A1: Household Debt-to-income Ratios
End 2018 or latest observation
Figure A1: Household Debt-to-income Ratios

Sources: European Central Bank; National agencies; OECD; RBA; Thomson Reuters