This study is an examination of demographic and economic changes in Australian households between 1996 and 2006 and their impact on home ownership.

It is substantially an update of one carried out by Dr Judith Yates (2002), in which she examined the decade 1986 to 1996.

This earlier decade was the era of deregulation, a tough one on middle Australia and on the financial system, when many of the long-term protections on the labour market and on housing finance were wound down. Unemployment and interest rates were high, and income inequality rapidly increased. In 1990, a series of financial failures occurred, accompanied by a credit crunch. As a result, borrowing on housing sunk to its lowest post-war level relative to asset values and outright ownership reached an all-time high. The national home ownership rate, which changes very slowly, fell by about 1.5 percentage points over the decade.

By contrast, the present study period of 1996–2006 was the most benign period for all forms of borrowing in Australia’s history. Gross household incomes rose by 23 per cent in real terms over the decade, about half of which was due to a fall in unemployment and the rest to improvements in rates of pay. Interest rates were held low in response to several global economic crises in 1997, 1998 and 2001. The financial system was extremely liquid, both from a fourfold expansion of the local money supply and from exotic derivatives and lending instruments spawned by global deregulation. Household debt in Australia rose very rapidly to 10 times its real 1990 level in 2008, and from 33 per cent to over 160 per cent of household disposable income.

Benign lending conditions and better incomes have usually been considered the key to improving home ownership, but in fact home ownership levels did not improve significantly or even recover to 1986 levels by 2006. It has been the task of this report to establish why this might have been the case.