Kudos to Bob Gottleibsen today. He finally manages to drag Australia’s growth quandry into the MSM light:
As the mining boom begins to fade, Australia is returning to “normal” and will require its new jobs to come from Sydney, Melbourne and Brisbane plus their surrounding areas.
…So what do we need to do? First off all we need to take the pressure off the Australian dollar, which is crippling four of our main capital city employment areas – exports education, tourism, manufacturing and research. And the higher dollar is also helping to send services employment offshore.
Too right and well done Gotti (although it’s actually about production, not jobs). Nonetheless, it is great to see an economic grey-beard at last canvassing the growth conundrum we at MB have been pointing to for years. Gotti goes on to highlight that there may be questions over lowering the dollar using interest rates because of the risk of a resurgent housing market. He concludes:
Over the weekend I was also exchanging views with Australia’s largest apartment builder Harry Triguboff who says that, while the rate cuts so far have boosted dwelling prices in certain areas of Sydney and Melbourne, in Queensland and the Central Coast they are still down by approximately 20 per cent.
“Think of these areas. They must rise. They need to rise desperately. We cannot have a country where only 20 per cent of the properties go up and 60 per cent go down while 20 per cent are static.”
…So here we have a crazy situation where we desperately need to kindle investment in export education, tourism, manufacturing and research plus we need a lot more houses to be built but we are holding it all back because we are frightened of a housing price bubble.
If banks increased their deposit requirements we could lower rates and there would be no housing bubble. Alternatively we could curb negative gearing.
Mostly true. Although we already have a house price bubble, not the danger of one. And the fact that it was caused in large part by negative gearing means to remove it now will cause the system to collapse as a million plus property investors head for the exit. So that’s out. Banks increasing deposit requirements (via macroprudential coercion) is a damn good idea and I’m all for it.
But mostly because it will prevent the kind of wide spread house prices that Harry would like to see.