THE former treasurer predicts tough times are ahead for Australia's property market.
THE former treasurer predicts tough times are ahead for Australia's property market. AAP

Costello warns Aussie economic luck is running out

FORMER Treasurer Peter Costello has warned property industry insiders that Australia's economic luck is "beginning to run out" as people move from spending to saving.

Mr Costello made the comment at an industry function in Sydney on Wednesday, but stopped short of labelling the property market as being in bubble territory.

He said that as real wages were falling, incomes had already peaked in Australia and people shutting down their credit cards in favour of opening savings accounts.

As the Abbott government continues to grapple with the getting its first budget through the Senate, Mr Costello said it was time to work out "how to put things back together".

His comments followed Treasurer Joe Hockey earlier this week rejecting claims of a housing bubble, as a Senate inquiry examines the drivers behind Australia's lack of affordable housing.

However, despite numerous witnesses to the Senate inquiry highlighting the effects of tax breaks and negative gearing on affordable housing, the government has signalled no intention of changing such policies.

The Senate inquiry, which has heard from numerous housing and economics experts, including respected economist Saul Eslake, who highlighted a lack of political will in addressing negative gearing in particular.

But despite rising speculation of a potential housing market bubble emerging, Mr Costello said property would remain a viable investment "if things revert to normal".

He also said policies centred on low interest rates and money-printing, which has been used in the United States since the global financial crisis, had to stop.