Independent research initiative · YSE Finance · Sydney, Australia
Economic Research / Methodology / v3.4

How resilient is Australia's economy?

The Australian Economic Sustainability Model (AESM) is an independent research framework examining households, credit, banking resilience and public finances through transparent official data.

Research methodology · ASFI score on holdQuarterly reviewRBA · APRA · ABS data sources
Explore the framework ↓How it works →
What this research is

A framework, not a forecast.

AESM is being developed to examine whether Australian economic growth and financial obligations appear sustainable over time. It distinguishes vulnerability—exposure to economic shocks—from resilience—the capacity to absorb them.

The first proposed component, the Australian Self-Financing Index (ASFI), contains eight indicators in four dimensions. A separate Australian Economic Health Index (AEHI) is in the design stage. An overall AESI has not been launched.

01 / ASFI Framework

Four lenses on economic sustainability

The dimensions are displayed separately so strong bank buffers do not automatically conceal household financial stress.

DIMENSION 01

Household Vulnerability

Household leverage and housing interest burden relative to income.

S01 · S02
DIMENSION 02

Mortgage Credit Risk

Riskier new lending and the performance of existing residential mortgages.

S03 · S04
DIMENSION 03

Banking Resilience

Bank capital and stable funding buffers that may help absorb shocks.

S05 · S06
DIMENSION 04

Fiscal Sustainability

Changes in government debt relative to GDP and the interest burden on revenue.

S07 · S08
02 / Indicator dictionary

Eight indicators. Definitions first.

These are the proposed public metric definitions. Numeric results remain withheld until original data vintages and methodology pass release checks.

CodeIndicatorSourceUnitScore
S01Household Debt to Disposable IncomeRBA E2%—
S02Housing Interest Charged to Household Disposable IncomeRBA E13%—
S03High DTI Mortgage Lending Share (≥6x)APRA Property Exposures%—
S04Residential Mortgage NPL RatioAPRA Property Exposures%—
S05Bank Common Equity Tier 1 Ratio (CET1)APRA / RBA FSR%—
S06Net Stable Funding Ratio (NSFR)APRA Performance%—
S07Change in General Government Net Debt to GDPABS Annual GFSpp—
S08Government Interest Expenses to RevenueABS Annual GFS%—
Unpublished scores are shown as “—”; this does not represent zero. “pp” means percentage points. All names and ratios are subject to final definition review.
03 / Methodology and evidence

Designed to be auditable

Quarterly review means examining newly published evidence each quarter—not pretending every source is available immediately on quarter-end.

Research process

  1. Collect and preserve source releases.Record the original observation period, source, release date, unit, and any statistical revision.
  2. Build a point-in-time dataset.Only incorporate observations after their public release date; preserve earlier versions.
  3. Assess each dimension separately.Test economic scoring assumptions against independent outcomes, not just historical percentiles.
  4. Validate before publication.Require scope comparability, full evidence, independent methodology review and editorial sign-off.

Current evidence limits

Research limitations: exact contemporaneous RBA E2/E13 readings for the historical 2025 Q4 test remain unverified. Some APRA readings are rounded or use an earlier quarter. Previous validation windows were short, overlapping and partly influenced by the pandemic.

The preliminary 0–100 piecewise scoring system uses researcher-selected thresholds. They are not official regulatory safety benchmarks and have not been validated as recession probabilities.

A score near any proposed alert line must not be treated as a forecast, investment signal or policy judgement.

Comparability and accounting decisions

Interest burden is not total repayments

S02 uses RBA Housing Interest Charged to Household Disposable Income. It is not the scheduled mortgage repayment ratio, which includes principal. RBA changed the relevant statistical publication in February 2023.

Bank regulation differs by institution

Capital and funding requirements depend on the applicable prudential framework. For applicable NSFR-regulated institutions, 100% is the regulatory minimum; research scoring anchors above it remain illustrative.

Accrual fiscal interest, not cash paid

S08 is defined as ABS General Government Interest Expenses n.e.c. divided by Total GFS Revenue for all government levels, excluding separately reported defined-benefit superannuation interest.

Annual data are not backdated

S07 and S08 refer to financial years. They enter any quarterly research snapshot only after their source release becomes public, and later ABS revisions are retained as separate versions.

04 / Longer-term design

AEHI — Australian Economic Health Index (proposed, not scored)

The wider model also considers productivity, income, consumption, profitability, labour conditions, the external sector and inflation. Its twelve research measures are proposed below, but the index has not been calibrated for publication.

View the 12 proposed AEHI measures
  1. E01 Real GDP per Capita Growth
  2. E02 Labour Productivity Growth
  3. E03 Real Private Business Investment Growth
  4. E04 Real Household Disposable Income per Capita Growth
  5. E05 Real Household Consumption Growth
  6. E06 Unemployment Rate
  7. E07 Non-Mining Corporate Profit Growth
  8. E08 Corporate Gross Operating Surplus Margin
  9. E09 Current Account Balance to GDP
  10. E10 General Government Net Debt to GDP
  11. E11 Government Interest Expenses to Revenue
  12. E12 Trimmed Mean Inflation
Design safeguard: AEHI E11 and ASFI S08 currently describe the same government interest burden. Before any AESI composite is defined, the methodology must avoid counting the same fiscal signal twice without explicit justification.
05 / Sources and governance

Frequently asked questions

Why is there no published ASFI score?

Original-source verification, scope checks and independent validation are incomplete. A data-quality HOLD must not be mistaken for an adverse economic assessment.

Will AESM be updated quarterly?

The plan is a quarterly research review. Some inputs are published after quarter-end and ABS fiscal measures are annual, so any future public update will follow verified release dates.

Can AESM predict a recession?

No reliable forward predictive claim has been established. The earlier backtests are exploratory, use limited overlapping windows and include unusual pandemic periods.

Is AESM published by the RBA, ABS or APRA?

No. AESM is an independent YSE Finance research initiative that references public statistics issued by those agencies.

Independent research disclaimer: AESM, ASFI, AEHI and AESI are research concepts developed independently of the Reserve Bank of Australia, the Australian Prudential Regulation Authority and the Australian Bureau of Statistics. This page is for general information only, not personalised financial, investment, tax or legal advice. No official economic-safety rating or validated predictive accuracy is claimed. The research methodology is subject to ongoing validation; no composite score is currently published.