Maybe these figures are still skewed by crooked brokers but it it will be much less than in the US in 2007, where loans were packaged and sold to third parties as sub-prime bonds. In Australia the banks are the ultimate owners of the loans so they need to know the truth.

The bottom of the above graph shows it is indeed true that lots of these investors take out interest-only loans, which is one of the things that worried Mr Tepper. The RBA is the first to admit interest-only loans are a potential worry because it can take longer to repay them.

But the RBA has looked into this and it says the interest-only loans made in recent years have been less risky in some other respects because they have tended to be taken out by higher-income borrowers, have lower LVRs, and on average have been paid down more quickly than a typical principal and interest loan.

Tepper's report claims that there is a dramatic but hidden oversupply of housing in western Sydney and prices could drop by 40 percent wiping out the banks.

Key indicators of the lending standards of bank loans AFR

It says big developers are concealing the fact that huge apartments are standing empty like housing estates in Florida swamp.

Well the RBA is worried about that too and here are some moderately reassuring numbers.

The time it takes to sell a house and the average discount on a house compared to its original listing price is stable. And it is much lower lower than during the global financial crisis when people really were desperate to sell.


Mr Tepper also says that he is worried about oversupply caused by the sort of home construction boom seen in the US in the 2000s. Perhaps there is a risk of oversupply in some areas but it is mostly not in the detached houses which predominate in outer suburbs which he says he visited.

How hard it is to sell a property RBA

This graph shows construction of detached houses has been basically static. The boom is in apartments especially in inner-city Sydney, Melbourne and Brisbane. There could be oversupply looming there. In any case, as the graph shows, apartment construction is now falling.

The key difference between the world of the Big Short and Australia today is that by and large people are able to pay back their loans. In the US interest rates rose suddenly in 2007 especially because interest-free starter packages were used to lure people into loans and they suddenly expired in 2007. These interest-free loans don't exist in Australia.

The best measure of how hard it is for Australians to repay loans is the share of income they they need to make loan repayments. The next graph shows that loan repayments compared to income are now down to about two thirds what they were in 2008 when the RBA had interest rates much higher.

Sure if interest rates rose fast people might struggle but there is no sign that interest rates will rise any time soon and indeed markets are betting on the opposite. In any case the RBA says many people have used the fall in mortgage repayments to get well ahead of their loans.

Building approvals are falling RBA

The other point is that western Sydney and outer Melbourne are both economically buoyant. Unemployment in outer Sydney in particular is about half the level during the financial crisis when the high dollar was killing manufacturing. The big house price falls seen so far are in states like WA and the Northern Territory where the mining boom has gone into reverse.

Prices in Australia might stop rising rising but it is hard to imagine in the next few years the sort of disaster that hit the US in 2007.

Read next: A short seller's guide the property market