Many of the Minsky-inspired analyses of the Great Recession fail to emphasise that the massive debt run-up and asset-price inflation of the pre-2007 years was led by household borrowing rather than, as in the canonical treatment, over-leveraged firms. Throughout most of the 2000s, US non-financial corporations actually lent to the financial sector.
Australia suffered less than other economies because, after the early-2009 blip, household debt resumed growing quickly. But today’s national accounts release shows private credit growth has again slowed, and this time may turn into outright private-sector deleveraging. Investment levels certainly don’t look like growing enough to make up for the looming withdrawal of government spending and household borrowing. The near future doesn’t look great.