Research Discussion Paper – RDP 2021-10 The Rise in Household Liquidity

Contents

• The Rise in Household Liquidity
• Institutional Features of the Australian Mortgage Market
• How Do We Measure Household Liquidity?
• Stylised Facts about Household Liquidity
• Household Liquidity and Mortgage Debt Dynamics
• The Rise in Household Liquidity and Falling Interest Rates
• Alternative Explanations for the Rise in Household Liquidity
• Conclusion
• Appendix A : Derivation of the Loan Amortisation Formulae
• Appendix B : Cross-country Evidence on Liquidity Buffers
• Appendix C : Household Liquidity and Local Area Housing Prices
• Appendix D : Household Liquidity, Precautionary Saving and Borrowing Constraints
• References
• Copyright and Disclaimer Notice

We would like to thank Alex Ballantyne, Anthony Brassil, James Graham, Jonathan Kearns, Amanda Martz, David Norman, Isaac Pan, Matthew Read, Lars Svensson, Joyce Tan, Michelle Wright and seminar participants at the Reserve Bank of Australia, the University of Sydney-RBA Banking Reading Group Workshop and the Virtual Australian Macroeconomics Seminar for helpful comments and discussion. The views expressed in this paper are those of the authors and do not necessarily reflect the views of the Reserve Bank of Australia. The authors are solely responsible for any errors.