In its latest statement on monetary policy (Internet Archive), the Reserve Bank of Australia highlighted that households in Australia have much higher private debt than before. Total private debt is approximately 120% of GDP (Internet Archive), roughly double Belgium's. Analysts hint this will restrict by how much the central bank will be able to raise the cash rate target (Internet Archive) to battle rising inflation in the near future.

Most mortgages in Australia are contracted on a variable rate, or fixed only for the short term. As such, rising interest rates not only affect people taking out new loans - they also affect the amount all other indebted households need to repay. This contrasts with Belgium for instance, where in the first 3 months of 2022 93.5% of mortgage contracts had a fixed term over the entire duration of the contract (Internet Archive). Only less than 1% of contracts closed in this quarter has a rate varying periodically. This despite strong consumer protections built into the Code of Economic Law see art VII.143, ยง 2 to 6 in the Flemish publication (Internet Archive): few of them vary immediately upon changes in the cash rate as the minimum term between changes is at least a year, and the updated interest rate can never exceed twice the original rate.

In contrast, Australian mortgages are rarely offered with a fixed interest rate period beyond 2 years - 5 years is practically the most I have seen advertised. Banks can vary the rate at will - they are not mandated to link a change to a variation in the cash rate, nor do they need to stick to that variation. Rates can go as high as the banks want them to go.

This is a remarkable difference in the products banks in these countries make available. I wonder to what extent this will influence how high the cash rate will be allowed to rise before politicians will need to step in, if at all they will, and how it may affect the evolution of houseprices in the countries. My current bet: Australian houseprices will decline relative to Belgian ones, and the cash rate won't grow as much. (At the time of writing, the RBA has a target cash rate of 0.35% while ECB still has a target cash rate of 0.00% though.)