Magazine of Socialist Action in Australia

Lindsay David’s Australia: Boom to Bust

Reading Time: 3 minutes

“Lindsay David published his book in April of this year, called Australia: Boom to Bust, yet no journalist or reporter in the domestic media will review it. The only coverage has been a solitary article in the St George and Sutherland Shire Leader. Nonetheless, on Amazon Australia, over the last 90 days, it has been the best-selling economics book authored by an Australian.” (Independent Australia, July 2014)

The reason mainstream Australian newspapers will not review a book that pokes holes in the property bubble is because they rely so heavily on advertising dollars from the real estate sector.

David’s book attacks the conventional narrative that the big four banks are ‘fundamentally sound’ and that rising property values are permanent. He undermines the idea that it’s safe for so many working people to borrow as much as they currently do for property. “Australia is living in a bubble. It’s at the tail end of the beginning of what could be an unavoidable catastrophic economic meltdown”, he argues in his introduction.

The 20+ year Australian economic boom has been based on mining exports to China and an unprecedented rise in property values. The big four banks have been the “primary drivers” of the economy, offering all too ready loans to companies and individuals.

David argues that Australia was lucky at the time of the Global Financial Crisis (GFC) in 2008. Just as some mining companies were close to insolvency, China “pumped steroids into its economy” with one of the biggest stimulus packages seen since the New Deal in the 1930s. Without this stimulus at least one of the big four banks would have been tipped over the edge. It was “a stroke of luck” for Australia and allowed the boom times to continue – at least in mining and property.

Low interest rates and a willingness by the banks to loan money has boosted property values. Despite Australia having a population density of less than three people per square kilometre, “it costs more to live in Adelaide than it does to live in New York”. He shows that the median house price is $311,555 in Tokyo, $405,400 in London, and a massive $679,338 in Sydney.

David writes: “Not many American or German households annually earning between $80k to $100k today would feel comfortable taking out a $700k loan to buy a house – in their eyes it would see as too risky. Too much debt. In Sydney or Melbourne, a $700k loan for a household annually earning from $80k to $100k would be deemed a calculated investment.”

He continues later “the average Australian household has more debt on its books than the average household of any other country…and twice the amount of debt of a comparable US household.” Private sector debt in Australia now equals $1.89 trillion – 20% more than the country’s total Gross Domestic Product (GDP).

This level of debt is reaching toxic levels. This is dangerous for families in debt but also for the lenders. At the time of the GFC, economists said the big banks in the US were too big to be allowed to fail. David argues that in Australia, the big four banks “are too big to save”.

The dangerous territory being entered into is best outlined in one graph which shows that a relatively safe bank (Zurich Cantonal) has 47% cash as a percentage of long-term debt. In comparison, Lehman Brothers had only 16% cash as a percentage of long-term debt in 2007, just before the GFC. Right now, Westpac has a mere 9% and the Commonwealth Bank 10%!

Lehman Brothers at its peak was 5% the size of the US economy. Its collapse triggered the GFC. The Commonwealth Bank’s assets equal 48.5% of Australian GDP, “if this bank went bankrupt in Australia, it would be apocalyptic.”

David reminds his readers of the 2014 prediction of famed US demographer Harry Dent that Australian property prices will fall by up to 50%. Dent explained that: “Bubbles always go up to the point where they just become unaffordable – and then they burst”. If this was to happen, hundreds of thousands of working class people would face negative equity – paying off a mortgage that would be far greater in value than that of the home it purchased – a terribly demoralising situation.

David asks: “If an economic shock hit Australia, sending the banks into financial mayhem, making property prices fall by 50%, and pushing the Big 4 banks to the verge of collapse, how would the government find between $100 billion and $700 billion to buy distressed assets and to honour its commitment to guarantee bank deposits?”

‘Australia: Boom to Bust’ has chapters on how and why the Chinese economy is slowing down. It also develops several scenarios as to how a collapse could occur here. These are all well argued but are not really new to any keen observer of the Australian economy. What makes this book so unique however is its spotlight on the property bubble. ‘Australia: Boom to Bust’ is in that sense brave, despite its unapologetic pro-business politics. It reflects growing concern in sections of the elite about the one-sided and speculative nature of main drivers of the economy in Australia. It’s well worth a read.

By Stephen Jolly


The COVID-19 pandemic has laid bare many of the problems with capitalism. The Socialist strives to explain the systemic causes of this crisis, and reports about the issues that are important to working people. We also help to organise struggles against the powers that be.

We don’t receive a cent from big business or governments. Our work is fully funded by our supporters. Even if half the people who read our website every month donated a few dollars each we would raise thousands to help our work!

We need organisations of struggle now more than ever, so if you support what we do please consider making a donation.

One-off or regular donations can be made securely HERE.