Rising global interest rates and tighter bank lending risk triggering a "mini-credit crunch" that could send Australia's house prices, a new report warns.

Australia’s current economic health has earned a “good without being great” rating from Deloitte Access Economics in its latest business outlook.

Overall the global economy is powering along, albeit with some softening in Europe, Japan and Korea, but Australia is benefiting from trading with countries that are in good shape, Deloitte says.

“Yet rising global interest rates are combining with a bout of bank caution on lending (via extreme vetting of loan applications in the wake of royal commission revelations) to generate a mini-credit crunch,” Deloitte said in a statement.

Any crackdown on lending could put further pressure on housing prices, which are already slowing, particularly in the key market of Sydney.

Recent Corelogic data shows Sydney home values have fallen five per cent in the year to July 15, while combined values across capital cities are down 2.1 per cent.

Deloitte says those current falls are not significant enough to be a worry for the broader economy.

Housing remains an important driver of wealth and economic growth for Australia, however, and any further drop in house prices could crimp spending of already debt-burdened households.

At a time when weak consumer spending – and resultant stagnant inflation – remains a key risk for the economy, any further slowdown would be a concern for the Reserve Bank of Australia.

Expanding on its “good but not great” theme, Deloitte says Australian industry is healthy thanks to strong global demand for the nation’s key exports of coal, iron ore and gas.

Around the nation, Deloitte says east coast Australia is the key to the nation’s wellbeing in 2018/19.

• On NSW: Deloitte says NSW is “a truly top notch performer” despite some borrowed strength from “silly” house prices. Infrastructure investment is critical, and any credit crunch could hit NSW hardest.
• Victoria will benefit from the “people power” of its growing population, though Deloitte says that strength is at risk from “toxic politics surrounding migration”.
• Queensland is “through the worst” of its mining industry slump and benefitting from people relocating from NSW to escape high house prices and booming tourism.
• Western Australia is recovering steadily after its post-mining boom crash thanks to growing commodities prices and demand, and new investment in mining output.
• Tasmania is at its strongest in years, courtesy of global growth and a weaker dollar helping agricultural exports and tourism.
• The ACT is “one of the best performing in Australia” thanks to growth in government spending, population and foreign student numbers.
• But Deloitte was less optimistic about the Northern Territory, saying the Top End will be at the bottom end of nationwide growth as jobs and spending dwindle despite surging gas exports.

By Peter Trute