Australian economic bubbles: which will burst next?

Bubbles are funny things – they grow from seemingly nothing, float around for a while and suddenly burst into thin air. An economic bubble is not as dramatic, but at the same time, we can acknowledge that they draw upon similar characteristics. 

By definition, an economic bubble is created when an asset is allowed to unsustainably (and often irrationally) increase in value. We have seen, and continue to see, these trends occurring ‒ anything from tulip importation in Holland during the early 17th century to more contemporary bubbles, such as housing inflation and mining booms. 

The real trick is knowing how to read the signals – and in today’s complex economy, the sharpest signals come from data. Business leaders who understand analytics, Ai, and economic growth trends and market indicators are better equipped to see bubbles before they pop. 

Mining 

Australia’s mining sector has rebounded strongly post-pandemic, driven by global demand for critical minerals like lithium and nickel – vital for the clean energy transition. In 2023, the Department of Industry, Science and Resources reported that Australia’s resource and energy exports reached a record AU$460 billion. However, with China’s growth moderating and global commodity prices cooling, volatility remains high. Data analytics and Ai applications in economics are now core tools for predicting price swings and planning new projects sustainably. 

Housing 

Australian housing remains a hot topic today. Prices surged again in 2023 despite rising interest rates, with CoreLogic reporting rising dwelling prices in all cities except Hobart. Household debt remains elevated – Australia’s household debt-to-income ratio is around 180 per cent, among the highest in the OECD. 

With cost-of-living pressures rising, wage growth patchy and borrowing costs staying higher for longer, understanding the forces behind housing demand and supply is critical for investors and policymakers. 

If housing prices correct sharply, the impacts could flow through to banks and credit institutions exposed to high household debt. While property investment brings economic activity, the current levels of debt and mortgage stress raise real questions about sustainability, especially as cost-of-living pressures bite and interest rates remain above the decade-long average. 

Many experts argue that broader policy settings – like tax incentives and supply measures - need to evolve to ease pressure and reduce the risk of a painful market correction. Understanding these signals and the data behind them, including Ai economic models, is vital for anyone working in finance, policy, or analytics today. 

Personal debt and credit 

Australians still carry high levels of personal debt – including mortgages, credit cards and Buy Now Pay Later schemes – at a time when household budgets are tight. ABS data shows household savings ratios fell back to pre-pandemic levels, leaving less buffer for economic shocks. 

Many economists warn that while a ‘big bang’ debt bubble pop is unlikely, rising arrears and tighter credit conditions could weigh on spending. This makes data literacy Ai and economic growth understanding crucial for banks, policy advisors and anyone managing financial risk. 

While many factors drive Australia’s high household debt, a key concern today is that cost-of-living pressures and weak wage growth are forcing more people to rely on credit to maintain their standard of living. Compared to the boom times of the mining supercycle, Australia’s economy is now more exposed to global shocks, high interest rates, and tighter household budgets. Without careful planning and financial resilience, this pattern risks stretching personal debt to unsustainable levels. 

Seeing the next bubble, and being ready. 

When dealing with economic bubbles, it is more likely than not that when things grow and increase in value at a rapid rate, it’s unsustainable. Australia has seen several bubbles form over its history – most recently in mining, housing, and credit. Not only is it up to the government to help manage risks and soften any sudden bursts, but it’s also up to business leaders and individuals to stay informed and read the signals. 

Today, the difference is clear: technology gives us more data than ever before, but it’s useless without the skills to analyse it. Professionals who can interpret economic trends, leverage Ai applications in economics tools and turn insight into action will be better positioned to navigate the next boom or bust. 

RMIT Online’s Master of Business Analytics and AI Strategy, Graduate Certificate in Business Analytics and Graduate Certificate in Data Science can equip you with the tools and practical skills to interpret economic shifts, manage risk and make smarter decisions. 

Find out more by speaking with one of our expert Student Enrolment Advisors on 1300 701 171.