From the AFR:
The Reserve Bank of Australia should consider signalling that its next move will be to raise official interest rates amid fears loose monetary policy might fuel a house price bubble, according to a ‘shadow board’ of prominent economists.
“For several members of the shadow board, the main domestic concern lies with the frothy housing market,” said board chairman Timo Henckel.
“Rising prices and clearance rates in the major Australian cities are becoming disconnected from their flagging fundamentals,” he wrote.
“At this stage of the cycle, in which monetary policy is still very accommodative, the RBA would do well to signal to the markets that speculation in the housing market needs be contained.”
Warwick McKibbin reckons capital is being misallocated “across the economy” and that:
“To avoid the US experience during 2001 to 2004, when rates were too low for too long, a move to more normal interest rates would be advisable”.
Too right. Act now. Macroprudential, jawboning and jack rates if necessary. This must be stopped.
