Chris Joye has delivered another reality check to the RBA, citing a former senior economist at the central bank, Jeremy Lawson, who believes the RBA mis-calculated the surge in investor-driven speculation. From The AFR:
“They underestimated how strong the investor pulse would be…”
Mr Lawson believes the housing market is between 20 and 30 per cent overvalued and presents the RBA and the Australian Prudential Regulation Authority with a “genuine test”…
He said the RBA had had a “change of heart” on the need to apply macro-prudential breaks on credit creation…
“We now have imbalances building in the housing market with the investor segment in Sydney and Melbourne running ahead of fundamentals,” Mr Lawson warned.
“Disposable income is not growing anywhere near housing credit and leverage is increasing off an already high base. This leaves Australian households vulnerable to a negative shock, like a hard landing in China, which could force unemployment up, house prices down, and create real difficulties for households that are over-levered.”
Spot on.
