The Household Debt Quagmire

We know that household debt has never been higher in Australia, but I do not think the true impact of this, especially in a rising interest, low income growth environment is truly understood.  We have to look beyond mortgage debt.

The latest RBA E2 – Households Finances – Selected Ratios shows that the ratio of household debt to annualised household disposable income , rose to 190.4, the ratio of housing debt to annualised household disposable income rose to 135, and worryingly the ratio of interest payments on housing debt to quarterly household disposable income has risen to 7.0, thanks to the out of cycle rate hikes and flat or falling incomes.  Of course failing cash rates helped households out, but the lending standards were not adjusted until too late.

But, here is the really scary picture of total debt value held mapped by debt to gross income ratio (DTI), aka Loan-to-Income (LTI). DTI or LTI is a good measure of potential risk in the system.

This first chart shows the distribution of debt value – of all types, including mortgagee, (owner occupied and investment), personal loans, credit cards, SACC borrowing, and all other loans – relative to gross income in debt-to-income bands.  We are using date from our household surveys.  It also shows the distribution of households, with more than half having low, or no debt, but with a long tail of highly indebted households.

Across Australia, more than 45% of all household debt (not just households with mortgages, but those mortgage free or renting) sit with households who have an LTI of more than 4.5 times annual income. I used 4.5 times because this is the ratio the Bank of England uses, and they say that higher LTI’s are more risky.

The second chart shows the relative distribution across the states and territories.

The third chart shows the proportion of households in each state and territory with a DTI of more than 4.5 times.  NSW holds the record, with more than half of all households above this, compared with 26% in ACT and 9% in NT.

This is a big deal, especially in a rising interest rate environment.  It means households have little wriggle room, and granted many will be holding paper profits in property which has risen significantly in recent years, this does not help with servicing ongoing debt repayments.

The effect of the debt burden is to reduce the ability of households to spend, and in effect it is a drag anchor on future economic growth.

The traditional argument that “most debt is held by those who can afford it” is partly true, but bigger debts require bigger incomes to service them, and the leveraged effect in a rising interest rate environment is profound.



The LTI Light Is Dawning!

NAB has said that they will “start automatically rejecting customers who want to borrow a high multiple of their income and only pay interest on their home loan, amid concerns over the growing risks created by rising household indebtedness.

From this Saturday, the bank will decline any customer applying for an interest-only loan who has a high loan-to-income ratio – an approach that banking sources said was not used by other lenders in the mortgage market”, according to the SMH.

While NAB already calculates loan-to-income ratios when assessing loans, it has not previously used the metric to determine whether a customer gets a loan, and such a blanket approach is understood to be unusual in the industry.

We have maintained for some time that LTI is an important measure. It should be use more widely in Australia, as it is a better indicator of risk than LVR (especially in a rising market).


UK Tightens Banking Controls

The Bank of England released their June 2017 Financial Stability Report. They announced a number of measures which together tighten controls on the banks, in response to growing risks in the system from strong lending momentum. They confirmed the need to act, ahead of any impending crisis, by thinking about “tail risks” in the system.

They reintroduced a counter-cyclical capital buffer, which was removed after the Brexit vote.

They are concerned about systemic risks from high loan-to-income mortgage lending, and said lenders should use a 3% serviceability buffer from their standard variable rate and also confirmed the limit on lending with a LTI of 4.5 times will be an ongoing feature of the market.

Mortgage lending at high loan to income ratios is increasing and the spreads and fees on mortgage lending have fallen. If lenders were to weaken underwriting standards to maintain mortgage growth, the FPC’s measures would limit growth in the number of highly indebted households. This would have material benefits for economic and financial stability by mitigating the further cutbacks in spending that highly indebted households make in downturns.

Here are a some of the interesting slides. The proportion of investor loans in the UK sits at around 17% of all loans, compared with 35% in Australia – yet the UK authorities are concerned at this level and have taken a number of steps to reduce momentum in this sector of the market.

Higher DSR households are much more likely to default, the UK are tracking this, yet in Australia there is no reporting on DSR by the regulators. We are relying on LVR, which is a poor measure of risk, as it depends on property values.

Likewise, they also show that Loan to Income (LTI) is important in that higher LTI households have less disposable income, and in a crisis are more at risk; plus their inability to spend has a depressive impact on economic growth. Once again, they track this, and have policy on the limit of mortgages above 4.5 times. In Australia, there is no regular flow of information on LTI, no policy on this, and yet we face significant economic slow-down as highly leveraged households cut their spending.

You can watch the presentation.


The Financial Policy Committee (FPC) aims to ensure the UK financial system is resilient to the wide range of risks it faces.

The FPC assesses the overall risks from the domestic environment to be at a standard level: most financial stability indicators are neither particularly elevated nor subdued.

As is often the case in a standard environment, there are pockets of risk that warrant vigilance. Consumer credit has increased rapidly. Lending conditions in the mortgage market are becoming easier. Lenders may be placing undue weight on the recent performance of loans in benign conditions.

Exit negotiations between the United Kingdom and the European Union have begun. There are a range of possible outcomes for, and paths to, the United Kingdom’s withdrawal from the EU.

Some possible global risks have not crystallised, though financial vulnerabilities in China remain pronounced.

Measures of market volatility and the valuation of some assets — such as corporate bonds and UK commercial real estate — do not appear to reflect fully the downside risks that are implied by very low long-term interest rates.

To ensure that the financial system has the resilience it needs, the FPC is:

  • Increasing the UK countercyclical capital buffer rate to 0.5%, from 0%. Absent a material change in the outlook, and consistent with its stated policy for a standard risk environment and of moving gradually, the FPC expects to increase the rate to 1% at its November meeting.
  • Bringing forward the assessment of stressed losses on consumer credit lending in the Bank’s 2017 annual stress test. This will inform the FPC’s assessment at its next meeting of any additional resilience required in aggregate against this lending. The FPC further supports the intentions of the Prudential Regulation Authority and Financial Conduct Authority to publish, in July, their expectations of lenders in the consumer credit market.
  • Clarifying its existing insurance measures in the mortgage market, designed to prevent excessive growth in the number of highly indebted households. This will promote consistency across lenders in their application of tests to assess whether new mortgage borrowers can afford repayments.
  • Consistent with its previous commitment, restoring the level of resilience delivered by its leverage ratio standard to the level it delivered in July 2016 before the FPC excluded central bank reserves from the leverage ratioexposure measure. The FPC intends to set the minimum leverage requirement at 3.25% of non-reserve exposures, subject to consultation.
  • Overseeing contingency planning to mitigate risks to financial stability as the United Kingdom withdraws from the European Union.
  • Building on the programme of cyber resilience testing it instigated in 2013, by setting out the essential elements of the regulatory framework for maintaining cyber resilience. It will now monitor that each element is being fulfilled by the relevant UK authorities.

NZ Reserve Bank Consults On DTI Restrictions

The NZ Reserve Bank has released its consultation paper on possible DTI restrictions. The 36+ page report is worth reading as it sets out the risks ensuring from high risk lending, leveraging experience from countries such as Ireland.

Interestingly they build a cost benefit analysis, trading off a reduction in the costs of a housing and financial crisis with a reduction in the near-term level of economic activity as a result of the DTI initiative and the cost to some potential homebuyers of having to delay their house purchase.

Submissions on this Consultation Paper are due by 18 August 2017.

In 2013, the Reserve Bank introduced macroprudential policy measures in the form of loan to-value ratio (LVR) restrictions to mitigate the risks to financial system stability posed by a growing proportion of residential mortgage loans with high LVRs (i.e. low deposit or low equity loans). This increase in borrower leverage had gone hand-in-hand with significant increases in house prices, particularly in Auckland. The Reserve Bank’s concern was the possibility of a sharp fall in house prices, in adverse economic circumstances where some borrowers had trouble servicing loans. Such an event had the potential to undermine bank asset quality given the limited equity held by some borrowers.

The Reserve Bank believes LVR restrictions have been effective in reducing the risk to financial system stability that can arise due to a build-up of highly-leveraged housing loans on bank balance sheets. However, LVRs relate mainly to one dimension of housing loan risk. The other key component of risk relates to the borrower’s capacity to service a loan, one measure of which is the debt-to-income ratio (DTI). All else equal, high DTI ratios increase the probability of loan defaults in the event of a sharp rise in interest rates or a negative shock to borrowers’ incomes. As a rule, borrowers with high DTIs will have less ability to deal with these events than those who borrow at more moderate DTIs. Even if they avoid default, their actions (e.g. selling properties because they are having difficulty servicing their mortgage) can increase the risk and potential severity of a housing related economic crisis.

While the full macroprudential framework will be reviewed in 2018, the Reserve Bank has elected to consult the public prior to the review. This consultation concerns the potential value of a policy instrument that could be used to limit the extent to which banks are able to provide loans to borrowers that are a high multiple of the borrower’s income (a DTI limit). A number of other countries have introduced DTI limits in recent years, often in association with LVR restrictions. In 2013, the Bank and the Minister of Finance agreed that direct, cyclical controls of this sort would not be imposed without the tool being listed in the Memorandum of Understanding on Macroprudential Policy (the MoU). Hence, cyclical DTI limits will only be possible in the future if an amended MoU is agreed.

The purpose of this consultation is for the Reserve Bank, Treasury and the Minister of Finance to gather feedback from the public on the prospect of including DTI limits in the Reserve Bank’s macroprudential toolkit.

Throughout the remainder of the document we have listed a number of questions, but feedback can cover other relevant issues. Information provided will be used by the Reserve Bank and Treasury in discussing the potential amendment of the MoU with the Minister of Finance. We present evidence that a DTI limit would reduce credit growth during the upswing and reduce the risk of a significant rise in mortgage defaults during a subsequent severe economic downturn. A DTI limit could also reduce the severity of the decline in house prices and economic growth in that severe downturn (since fewer households would be forced to sharply constrain their consumption or sell their house, even if they avoided actual default). The strongest evidence that these channels could materially worsen an economic downturn tends to come from countries that have experienced a housing crisis in recent history (including the UK and Ireland). The Reserve Bank believes that the use of DTI limits in appropriate circumstances would contribute to financial system resilience in several ways:

– By reducing household financial distress in adverse economic circumstances, including those involving a sharp fall in house prices;
– by reducing the magnitude of the economic downturn, which would otherwise serve to weaken bank loan portfolios (including in sectors broader than just housing); and
– by helping to constrain the credit-asset price cycle in a manner that most other macroprudential tools would not, thereby assisting in alleviating the build-up in risk accompanying such cycles.

The policy would not eliminate the need for lenders and borrowers to undertake their own due diligence in determining that the scale and terms of a mortgage are suitable for a particular borrower. The focus would be systemic: on reducing the risk of the overall mortgage and housing markets becoming dysfunctional in a severe downturn, rather than attempting to protect individual borrowers. The consultation paper notes that DTIs on loans to New Zealand borrowers have risen sharply over the past 30 or so years, with further increases evident since 2014. This partly
reflects the downward trend in interest rates over the period. However, interest rates may rise in the future. While the Reserve Bank is continuing to work with banks to improve this data, the available data also show that average DTIs in New Zealand are quite high on an international basis, as are New Zealand house prices relative to incomes.

Other policies (such as boosting required capital buffers for banks, or tightening LVR restrictions further) could be used to target the risks created by high-DTI lending. The Bank does not rule out these alternative policies (indeed, we are currently undertaking a broader review of capital requirements in New Zealand) but consider that they would not target our concerns around mortgage lending as directly or effectively. For example, while higher capital buffers would provide banks with more capacity to withstand elevated housing loan defaults, they would do little to mitigate the feedback effects between falling house prices, forced sales and economic stress.

The Reserve Bank has stated that it would not employ a DTI limit today if the tool was already in the MoU (especially given recent evidence of a cooling in the housing market and borrower activity), it believes a DTI instrument could be the best tool to employ if house prices prove resurgent and if the resurgence is accompanied by further substantial volumes of high DTI lending by the banking system. The Reserve Bank considers that the current global environment, with low interest rates expected in many countries over the next few years, tends to exacerbate the risk of asset price cycles arising from ‘search for yield’ behaviour, making the potential value of a DTI tool greater.

The exact nature of any limit applied would depend on the circumstances and further policy development. However, the Reserve Bank’s current thinking is that the policy would take a similar form to LVR restrictions. This would involve the use of a “speed limit”, under which banks would still be permitted to undertake a proportion of loans at DTIs above the chosen threshold. By adopting a speed limit approach, rather than imposing strict limits on DTI ratios, there would be less risk of moral hazard issues arising from a particular ratio being seen as “officially safe”. Exemptions similar to those available within the LVR restriction policy would also be likely to apply.


Latest Loan To Income (LTI) Data

We have updated our core market model with household survey data this week. One interesting dynamic is the LTI metrics across the portfolio. We calculate the dynamic LTI, based on current income and loan outstanding.  This is not the same a Debt Servicing Ratio (DSR), and is less impacted by changes in mortgage rates. It is also a better measure of risk than Loan To Value (LVR)

LTI has started to become an important measure of how stretched households are. For example the Bank of England issued a recommendation to the PRA and the Financial Conduct Authority (FCA) advising that they should ‘ensure that mortgage lenders do not extend more than 15% of their total number of new residential mortgages at loan to income ratios at or greater than 4.5’.

In response, UK banks trimmed their offers. For example,

NatWest is lowering its loan-to-income ratio for some borrowers, which means they won’t be able to borrow as much to buy a home.

House buyers who stump up a deposit between 15 and 25 per cent will only be able to borrow up to 4.45 times their annual income, down from the previous maximum of 4.75 per cent.

The new multiple will apply to both single and joint earners.

The move suggests a rising number of borrowers are having to stretch themselves to be able to afford to buy a home as prices continue to rise.

Turning to Australia, we start with a state by state comparison.  The AVERAGE loan in NSW is sitting at close to 7, ahead of Victoria at over 5, and the others lower. This highlights the stress within the system for property purchasers in Sydney, with affordability a major barrier.

Across our household segments however, the three most exposed segments are the most affluent. Wealthy Seniors sits about 9, followed by Young Affluent at 8 and Exclusive Professionals at 7.5. On the other hand, Young Growing Families are at around 5.5 (still above the Bank of England threshold).

Looking at type of buyer, First Time Buyers are sitting at 7.5%, with those trading up at 6%. Holders are sitting at 4.5%

Finally, here is an average by age bands, and plotted against relative volumes of mortgages. Pressure is highest in the 60+ age groups, this is because incomes tend to fall as households move towards part-time or retirement, but these days more will still have a mortgage to manage.

The dip in volumes in the 25-29 group is explained by many in this band choosing education, or starting a family, rather than home purchase, and the peak volume for purchase in after 30.

Overall LTI is a good indicator of affordability pressure, and the regulators could [should?] impose an LTI cap to slow lending growth, counter building affordability risks and rising housing debt.


Understanding Household Income, Wealth and Property Footprints

Today we commence the first in a new series of posts which examines household wealth, income, property and mortgage footprints. We will look at the latest trends in LVR and LTI; highly relevant given the tightening standards being applied in other countries, including Norway and New Zealand. We will be using data from our rolling household surveys, up to 9th September 2016.

Today we paint some initial pictures to contextualize our subsequent more detailed analysis, which will flow eventually into the next edition of the Property Imperative, due out in October 2016.

To start the analysis we look at the relative distribution of our master household segments. You can read about our segmentation approach here.

segment-distNext we show the relative household income and net worth by our master segments. The average household across Australia has an estimated annual income of $103,500 and an average net worth (assets less debts) of $600,600; the bulk of which is property related.

segments-income-and-wealthThere are wide variations across the segments. The most wealthy segment has an average annual income of more than eight times the least wealthy, and more than ten times the relative net worth.

Across the states, the ACT has the highest average income and net worth, whilst TAS has the lowest income (half the income), and NT the lowest net worth (third the net worth).

states-income-and-wealthProperty owners are better placed, with significantly higher incomes and net worth, compared with those renting or in other living arrangements. Those with a mortgage have higher incomes, but lower net worth relative to those who own their property outright.

propertys-income-and-wealthThe loan to value (LVR) and loan to income (LTI) ratios vary by segment.

lti-and-lvr-by-segmentYoung growing families, many of whom are first time buyers, have the higher LVR’s whilst young affluent have the higher LTI’s (along with some older borrowers). Bearing in mind incomes are relatively static, those with higher LTI’s are more leveraged, and would be exposed if rates were to rise.

Finally, we see that many loans have been turned over, or refinanced relatively recently, so the average duration of a mortgage is under 4 years.

inceptionThere is a relatively small proportion of much older dated loans which we have excluded from the chart above. Nearly a quarter of all loans churned in 2015, and 2016 shows the year to date count.

Next time we will look at LTI and LVR data in more detail.

Property price to income ratio is rising in Sydney, Melbourne and Canberra

From CoreLogic.

Utilising quarterly household income data from the Australian National University, CoreLogic has developed quarterly measurements of the ratio of property prices to annual household income.  This data is extremely valuable when looking to measure housing affordability.  The measure is available at a number of different geographies from SA2 regions (generally about the size of a suburb or group of suburbs) all the way up to GCCSA (capital city and rest of state) regions.  When looking at the analysis it is important to note that a higher ratio means housing is less affordable and a lower ratio indicates better affordability.

Chart 1
With property prices varying greatly between each of the capital cities it is interesting to note that the variation in household incomes in nowhere near as large.  In March 2016, Hobart had the lowest median dwelling price at $337,250 and Sydney had the highest median price at $775,000.  Meanwhile, household incomes range from as low as $1,175/week in Hobart to $2,118/week in Darwin.  Obviously the differences in property prices and incomes impact on housing affordability, so let’s take a look at each of the capital cities and the ratio of prices to income over time.

Outside of Sydney, Melbourne and Canberra housing affordability is improving with each capital city having a current ratio which indicates affordability has been worst in the past.  The problem is that almost 2 out of every 5 Australians live in either Sydney or Melbourne and these two cities have also been the epicentres of employment and economic growth over recent years.  Deteriorating housing affordability in Sydney and Melbourne impacts on significantly more people than deteriorating housing affordability elsewhere around the country.

This measure of affordability provides a high level overview of the relative housing affordability across the capital cities, but it is important to remember that geographically across each city the affordability story can be dramatically different.  Furthermore, this analysis does not take into consideration interest rates which can make housing affordability more affordable.  While interest rates are undoubtedly a consideration for buyers, they must also consider that interest rates can fluctuate dramatically over the life of a mortgage.

LTV and DTI Limits—Going Granular

DFA analysis of Australian mortgages highlight that we have high LTI ratios, and high LVR ratios, both indicating a build up of systemic risks in the system. We used postcode level analysis, and believe that it is essential to “get granular”.

Now the IMF has released a working paper on the effectiveness of using loan-to-value (LTV) and debt-service-to-income (DTI) limits as many countries face a new round of rising house prices. Yet, very little is known on how these regulatory instruments work in practice. This paper contributes to fill this gap by looking closely at their use and effectiveness in six economies—Brazil, Hong Kong SAR, Korea, Malaysia, Poland, and Romania.

IMF-LTI-LVRIn most cases,the caps on LTV and DTI started in the range of 60–85 percent and 30–45 percent, respectively, for mortgage loans. In all countries, there were changes to the limits of LTV/DTIs typically because the authorities noted that they were not having the desired effect. In some cases, house price and mortgage growth did not fall, and in other cases, the limits did not bind. Concerned with speculative activities, authorities in some countries lowered the caps selectively either for speculative prone (geographical) areas or for individuals with multiple mortgages. In one case, the centrally set caps were removed and banks were allowed to set their own limits, validated by supervisors. However, this did not work, and stricter requirements were put back in place.

To curb leakages, the limits were extended in some of the countries to insurance companies, mutual funds and finance companies that advertised mortgage products. It was also extended to development financial institutions.

Insights include: rapid growth in high-LTV loans with long maturities or in the number of borrowers with multiple mortgages can be signs of build up in systemic risk; monitoring nonperforming loans by loan characteristics can help in calibrating changes in the LTV and DTI limits; as leakages are almost inevitable, countries strive to address them at an early stage; and, in most cases, LTVs and DTIs were effective in reducing loan-growth and improving debt-servicing performances of borrowers, but not always in curbing house price growth.

Note: The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Getting To Grips With Loan To Income

We think that the ratio of loan outstanding to income (LTI) is a good indicator to assess the health of a mortgage loan portfolio, especially when incomes are not rising fast. In Australia, there is no official data on LTIs, from either the statistical or supervisory bodies, or from individual lenders. We think this needs to change. Internationally, there is more focus on the importance of LTI analysis, and LTI is regarded by many as the best lens to assess potential risks in the portfolio. We highlighted the New Zealand analysis recently.

We recently analysed data from our household surveys and presented some of the data in an earlier post, comparing LTI with LVR. Today we look further at the relationship between LTI and income, again using the DFA household data. We find significant variations. The data takes the current loan balance, and current income data (not that which may have existed when the loan was written initially).  Not all banks appear to update their customer income data regularly, so many will not know the true state of play. When incomes are rising fast, as happened in the early 2000’s, this was probably not a issue, but now with income growth slowing, and loans larger, this is much more important.

The first chart shows the income scale on the left, and the LTI on the right, and we look at the loan size across the page. We see that LTI’s tend to be lower and more consistent up to about $300k, but as the loan size rises above this, the loan to income ratio varies significantly. Some borrowers with large loans have an LTI on 15-20. These larger loans will be assessed by lenders on other factors, including assets and other investments held.

LTI-and-Income-By-Loan-Value-Apr-2015Now, lets shift the lens to the various mortgage providers. I have disguised the individual lenders in this chart, but this shows the average LTI of all mortgages outstanding, and average household income by provider. The highest portfolio has an LTI of above 6, the lowest, half as high. It is fair to assume therefore that banks use different underwriting criteria to grant loans. All else being equal, higher LTI is higher risk.

LTI-and-Income-By-Provider-Apr-2015So now lets look at interest only loans versus normal repayment loans. This is important because interest only loans make up more of the portfolio,  We see that the LTI is somewhat higher on an interest only loan, though these loans on average tend to align with slightly higher income.

LTI-and-Income-By-Int-Only-Apr-2015We also find that normal repayment loans, compared with a line of credit or offset loan, have a lower LTI, and income.

LTI-and-Income-By-Type-Apr-2015We find that households whose education level reached university have higher incomes, and a higher LTI compared with households who left after education at school level.

LTI-and-Income-By-Edu-Apr-2015Looking at the DFA segments, we find that those trading up, and first time buyers have the highest LTI, but there is a significant difference in average incomes between the two. We do not capture LTI data for Want To Buys, Property Inactive households or Investors. We also see that those who own property, with no plans to change, have a lower average income than those aspiring to enter the market.

LTI-and-Income-By-Pty-Segment-Apr-2015We have sorted the data by our core segments, and see that the Exclusive Professional segment has the highest income and the highest LTI. But note how the Young Affluent have an average LTI of around 6, yet their income is significantly lower. Those stressed households generally have significantly lower LTI’s so we can see that underwriting criteria does vary by segment, and the lowest LTI resides amongst Wealth Seniors.

LTI-and-Income-By-Segment-Apr-2015Another lens is the DFA geographic bands. Here we find that households in the inner suburbs have the highest LTI, around 6, whilst both income and LTI drift lower as we migrate into the more remote regional areas.

LTI-and-Income-By-Band-Apr-2015Finally, up to now we have used national averages, but it is worth highlighting that average incomes and LTI do vary across the states. NSW has the highest LTI, around 5, whilst NT sits around 2. Average household income is highest in the ACT, but NSW and WA also have higher levels of average income, compared with some of the other states.

LTI-and-Income-By-State-Apr-2015We think there is important work to be done to apply risk lenses across LTI bands, and we believe we need reporting on this important aspect. Without it, we are flying blind.

Household Debt Burden Increases Again

Using the RBA household ratios, we can look at the effect of debt on the average household. It blows up the myth of “household deleveraging”, much talked about after the GFC. Whilst the average data masks the differences between different household segments (see the segmented analysis in our survey and we know debt is becoming more concentrated in some households, whilst others pay down), it can tell a story. The first chart shows the ratio of housing debt to income, and we see it has been rising steadily since 2013, and is substantially higher than in 2000. The other point to note is that the ratio of housing debt to assets is down a bit, thanks to house prices rising faster than debt. However, households have never been so in debt.

HouseholdRatios2Another way to look at the data is to compare the ratio of interest payments to (quarterly) average income. We see that with rates currently low, the ratio is down from its high in 2008. However, it is worth noting the average home loan rate has fallen further compared with the housing interest payment to income ratio. This is because relative to income the average mortgage is bigger today – reflecting elevated prices and higher loan to value ratios.

HouseholdRatios1This is consistent with the loan to income ratios we highlighted earlier and a fall in real incomes. More evidence the RBA should act!