OECD piles pressure onto RBA housing blunder

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The great monetary blunder of our time, attempting to slingshot the Australian economy over the mining bust using a housing bubble, is cast in stark relief today by new advice from the OECD to lift interest rates despite plunging growth, at least according to the AFR:

The Reserve Bank of Australia should raise interest rates in the first half of next year to prevent housing prices rising to risky levels and “unwinding sharply”, the Organisation for Economic Cooperation and Development has advised.

The OECD’s semi-annual economic outlook sounds an alarm bell about the household saving rate declining, while house prices surge.

Despite the sub-par growth, the OECD recommends the Reserve Bank begin lifting interest rates from the second quarter of 2015, saying that persistent low rates are causing a “search for return” among property investors.

…It supports the Reserve Bank considering imposing borrowing restrictions on investors, after median capital city house prices jumped 9 per cent in the 12 months to September 30. Sydney house values surged 14.6 per cent, according to the Australian Bureau of Statistics.

I guess that’s accurate, though I can’t find the advice to jack rates in the report, only that macroprudential is needed pronto. Here it is, page 80:

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.