Joye: Bubble will prevent rate cuts

From Mr Joye:


Exploding house prices are turning into a real headache for the Reserve Bank of Australia, which for the last two years has been happy to blow the bubble and bugger the long-term consequences.

The latest data are breathtaking and do not require any hyperbole to highlight. They look bad in isolation and compared to the rest of the world.

Well, yes, but it’s been that way for ten years so it’s a bit late to worry now.


  1. Bubble will prevent rate cuts – No it won’t, and when things really starting tanking – RBA will cut to zero and beyond, and ignore the housing market. Every other major OECD country has… have a look in Europe, Sweden, Holland, Denmark, UK, and basically everywhere else… and so will we! All without exception have housing bubbles!!!!

    When this next crash comes – it will make 2008 look like a walk in the park.

    • Exactly RT!!! They will not only ignore the housing market but inflation and any other thing that might be a bit irritating like the external account.
      We are headed towards the dismantling of our whole economic and social system.

      • Yes, and eventually I think Ludwig Von Mises will be proved right.

        “….The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved….”

      • “They will not only ignore the housing market but inflation and any other thing that might be a bit irritating like the external account.”

        I hope I’m not grossly misquoting him, but I believe Mark Todd describes what is coming as interest rate ebola coming to a shore near you!

    • “and beyond”
      You bet! Pitchfork territory coming… So glad I’m young and fit for when TSHTF.

    • +1. Negative interest rates coming to Oz. We are already at record lows and downturn has not even started yet.
      Due to the problem that around 40% of us have no debt the rest are ball deep. We will run out of credit worthy borrowers once unemployment hits double figures.

      • No they are not. The dollar will be consigned to toilet paper status if that happens, especially if the Fed hikes.

    • I don’t know how much of a headache exploding prices are for the RBA. I think they would have a real migraine if prices were falling.

      • Prices are not in their mandate.
        Prices are not inflation since 1998.
        RBA must ignore falls and not let this prevent rate increases if inflation or other criteria warrant it.

  2. So basically we wait for demand to corrode with the current rate – we need to feed housing speculators more some jobs – Car industry anyone? Mining infrastructure completion anyone?…..

  3. RBA targeted price increases!! What’s the surprise!? No they will slash/maintain for the foreseeable future. RBA haven’t given a stuff since 2003 but even then did not do nearly enough.

  4. A 2010 OECD report said the following:

    “……Another concern is about the ability of monetary policy to thwart the development of a housing bubble without causing widespread damage to the rest of the economy. In a house price boom, prices increase strongly – often at double digit rates – and expectations of future prices are similarly upbeat.
    Under these conditions, large policy rate hikes would be necessary to cool housing markets. High interest rates would crowd out sound and socially useful investments….”

    Google “Bird’s Eye View of OECD Housing Markets”. The url keeps changing. I have posted longer excerpts from this paper here before.

    It is incredible how the right insights keep coming out and making SFA difference to mainstream policy.

  5. Who gives a flying f%#k about our monstrously unproductive speculative malinvestment bubble, we need lower rates now!

  6. Is anyone else considering a move overseas? It’s hard to imagine how we’re not going to escape disaster.

    • Left in 2007 thinking 5 years tops. Now in absolutely no rush to return. Not just the economic clusterf*ck. Australian mainstream opinion needs a reverse lobotomy before I’d be comfortable returning.

    • There’s just a real sense the country has turned nasty. Its repressive in every possible way, but particularly with regards to gaining access to and thriving from the social norms and resources that previous generations benefited from. It just feels like that has permanently changed.

      Smart move to leave.

      • Takes longer than a weekend to organise moving to a different country, most likely for good – there’s at least a few months to go before the peak is hit, and a year after that before it shows up in NOM statistics.

        “..and great will be the handwringing thereof, but of action, none will be seen.”


        “Numbeo is the world’s largest database of user contributed data about cities and countries worldwide. Numbeo provides current and timely information on world living conditions including cost of living, housing indicators, health care, traffic, crime and pollution.”

        Excellent resource.

      • Our emigration of 25-35 year old professionals is at an historical high now.

        Yeap. It’ll be hard for me to go due to family ties (unless it is across the ditch) but I am trying to convince my brother who is single to make the move. Hopefully he does.

      • Decimation by definition doesn’t even begin to describe that oncoming carnage. At this point it is an inevitability.

    • Next best thing is find yourself a Japanese wife. They’ve seen first hand what a real estate bubble and wipe out looks like.

      You won’t be nagged into buying into the Ponzi. Fact.

    • Will be gone in less than a month.Events here will be very interesting to watch from a distance.

    • Yep, mid thirties professional with young family, will be out of Australia within the next 12 months

      • +1
        35. Left. Came back for job (mining) will be gone as soon as the contract is up.
        Saved every penny my whole career, but don’t see a future in Australia.
        Will attempt to retire in Mcleod Ganj, Dharamshala, Himachal Pradesh (Northern India)
        Or maybe if I just stop worrying about how to buy into a property bubble, I’ll have a brighter idea in a year or two.
        Who knows? Maybe I can marry some local and start a guesthouse.

      • Will attempt to retire in Mcleod Ganj, Dharamshala, Himachal Pradesh (Northern India)


        Good luck BTW!

    • The good woman and I are looking at it, and lately looking a lot more seriously. What countries are people considering to be a good move to that avoids crashing countries ?? Vietnam is on our list at the moment.

      • Why would Vietnam be a joke?

        From others who have worked there as expats, I understood expat lifestyle there is pretty good.

      • ever been there Stat? could be good for an adventure for a year or two. you would have to fly home for any medical treatments. corruption is on biblical proportions …. err so not too different from here then for that one.

      • For mid – late 20s professional no kids temporary adventure might be fine. Move back when the smoking ruins have cooled down enough to be touchable without giving third degree burn. Maybe not one or two years, but could be five or six years.

        Medical care was never part of my decision making process when I was in my twenties.

    • I understand things will turn bad and really bad for some but if you are not indebted or if you have good financial arrangements, why would you leave? It’s not like the situation is much better anywhere else!

      • Tracjectory is definitely better elsewhere – i.e. other places look close to pulling themselves out of a hole, we may not have gone over the cliff yet…

    • Where to kodiak?

      We are facing a serious disaster but will it be that much worse than everywhere else? I’m not sure of that answer.
      However this place is sure pretty liveable.

      • I’m not sure, but I disagree that Australia is liveable and it’s going to get much worse. It’s already not worth the expense.

    • Me. Looking at Germany as I’m a programmer. Language is a barrier, but certainly not impossible. I just look to the housing madness and complete social injustice on the young for a surge of motivation.

    • Have my visa application process under way at the moment. It’s going to be tough to finally say no to my boss and my clients when I am finally ready to pull up stumps. They’ve been good to me, but I’ve got to get out of here before I end up being trapped with my salary and purchasing power totally destroyed due to a tanked exchange rate.

      • It’s going to be tough to finally say no to my boss and my clients when I am finally ready to pull up stumps.

        Maybe the very first time you say it, but I have a feeling it’ll get really easy really quickly.

    • Early 30s already lived in Ireland for 6 years, I have an Irish passport which means EU passport. I left because the weather did my head in (rain rain rain rain). But being back I was happy at first, weather was good. It seemed the economy was doing well… then I looked at the possibility of buying a house and realised the Australian dream was over…..

      I was in Ireland as the property boom was in full swing and watched it crumble, it went from very expensive to cheaper place to live. Hard to find a good rental to easy to find a nice place. It wasn’t nice to see lots of people suffering with no work etc.. But sometimes I think this country needs a good recession to put some manners back on people. Especially the boomer generation who think they’re invisible and screwing the younger generation (weather deliberate or not). Then you have Abbott, god could he be any worse?

      Too many invested interests in Australia that want it all to remain the same, this rentier economy doesn’t provide opportunities for young Australian’s, well it certainly makes it harder for us.

      Not sure where to move next, sister is in Africa. I’ve never been to Latin America, I could go to the US but I hate their foreign policies and culture.

      Germany appeals, as does parts of Scandinavia, but they have a far right movement going on right now… 🙂

      • Lots of comparatively cheap liveable places in south/central America.
        Argentina and Chile are awesome places if you’ve got the skills to work there.
        Peru is cheaper still but harder to find work.
        Lots of opportunities in Brazil, but Brazilian portuguese isn’t the easiest language to learn.

        I would easily live in any Scandinavian country, but I don’t have the skills to get in. They are pretty expensive countries to hang out in while you look for a fat woman goodly enough to marry you. Shout a round in Norway and you’ll feel it.

        Germany and US are also good options. For me US would win out… plenty to explore and english speaking.

    • Already done it (living in California with wife and 3 kids). Might come back if sanity returns to Australia. The way it is now; you can keep the place.

  7. Good thing APRA and its wet lettuce leaf regulation is on the ball.

    We are going to have our own little version of greece and the Euro zone here i think. States are going to need more and more federal funding to make ends meet and our current crop of neo-dimwits are going to force public asset sales for a pittance to their mates in return for federal bailout money


      love this guy.

      “EVEN if David Leyonhjelm had a terminal illness, he would rather die than see a cent of taxpayer money spent on research to find a cure.

      The Abbott government has linked $150 million in annual science funding to its controversial university deregulation plan, risking the jobs of 1700 researchers.”

      Ive seen several people declare their bravado in this manner over the years, only to be reduced to crying children when that diagnosis is finally for them, and lament how is it possible in this day and age there is no cure.

      I mean honestly what a tool this guy is. Has he not in his life benefited a lot from govt sponsored research and vaccination programs. What would his life be like now if it was solely a profit motivation.
      Here he stands living a life that has benefited greatly from government sponsored health programs and he has the gall to declare to all and sundry that it should be otherwise. Misbegotten politicians of his ilk need to be put in their place.

      • “Ive seen several people declare their bravado in this manner over the years, only to be reduced to crying children when that diagnosis is finally for them, and lament how is it possible in this day and age there is no cure. ”

        The libertarian hypocrisy started at the top.,_but_grabbed_social_security_and_medicare_when_she_needed_them

        Ayn Rand was not only a schlock novelist, she was also the progenitor of a sweeping “moral philosophy” that justifies the privilege of the wealthy and demonizes not only the slothful, undeserving poor but the lackluster middle-classes as well.

        Her books provided wide-ranging parables of “parasites,” “looters” and “moochers” using the levers of government to steal the fruits of her heroes’ labor. In the real world, however, Rand herself received Social Security payments and Medicare benefits under the name of Ann O’Connor (her husband was Frank O’Connor).

  8. The RBA explicitly said they were hoping housing would get us through the mining downturn when they started this rate cutting cycle.

    What’s changed?

    Any public talk of an overheated market is just to placate the gullible and give the RBA something to point toward if this goes terribly wrong.

    Short memories.

    They can’t get the desired construction boom without the blowout – especially with the ludicrous incentives to just buy existing housing.

    • Exactly. Nothin has changed for targets, in fact RBA must be stoked at the success of their brilliance… How’s that mining cliff hole filling construction boom going? 😉

  9. I can see the press releases now….

    RBA “We warned and advised APRA to monitor this situation closely and implement necessary rules to ensure risk in the system was mitigated.”

    APRA “Housing prices and investment is not our responsibility, it rests with the Treasury”

    Treasury “We advised the Govt that there were risks of the housing market overheating and sought their guidance for appropriate policy settings”

    Govt “We had assurances from the RBA that housing was well contained and that they were working with other regulatory authorities to monitor the situation”

    Meanwhile I thought I should remind the RBA what a bubble looks like….

      • He was wrong because he didn’t spot Chinese stimulus.

        I suspect he’s on the money now.

      • “He was wrong because he didn’t spot Chinese stimulus.”

        Nor the Henry/Rudd cavalier attitude to selling the country off to foreigners. Of course they are just part of a very long line. In the 12 to 18 months (I thought it was 12) post GFC $100B flowed into this economy from foreign interests.

  10. When the SHTF Australia and NZ will be a refuge for those that can afford to escape here. OZ might be the last bubble to burst…………..

    • NZ and Australia will be the walls when the SHTF – precisely the location you want to be nowhere near.

  11. New normal –

    (All Dwellings)

    Index Value

    Day on Day

    % Change
    Qtr on Qtr

    % Change
    Yr on Yr






  12. Makes you really wonder the extent of politician pressure on the RBA and regulators.

    Future politicians should be renounced of any investments that can raise conflict of interests in doing their job, which is for the country and its people.

    Double their salary, increase their benefits if need be to compensate and reward the hard workers and to those true to their words… but remove their ability to invest or take advantage of loop holes that is/can cripple the country.

    • “Double their salary, increase their benefits if need be to compensate and reward the hard workers ”

      Do you imagine there is a single politician current or in the history of the world who does not believe they fall into this category ?

    • Why not go the whole hog, and introduce a bonus scheme, with options that vest if certain metrics are met (unemployment level, literacy rate, GDP per capita) – at least then the conflict of interest will be visible to all.

      • Sauce – how about the RBA, Treasury etc with all their IP’s governing their economic thinking?

      • To flawse…
        *Well you can throw pretty much anyone who is employed by an organization whose services impact the public from a government policy/regulation point of view.
        As mentioned, increase their salaries instead to offset the “restrictions” in their roles/jobs.

        We all know the decision makers are not acting out, because they have a lot of stake in the property market.
        Let’s not even mention the CEOs of the 4 major banks also applying pressure on them to drag out or halt any counter measures.

        Basically, the people who are benefitting from the bubble are all in it too deep with each other, they want to cash in as much as possible, then cash out when they know they’ve exhausted Australians ability to accumulate debt.
        Figures actually show Australians are already exhausted… makes me think all the decision makers have their houses for sale at the moment and once they cash out, they let the bubble burst.

        The next government and regulators NEED to be “free” of any conflict of interests, if sports stars aren’t allowed to bet ON any games in their respected field, then so are the regulators who control the flow of the economy, they should not be allowed to make money on the economy outside of their salaries. If they want money, then work on the private sector.

      • “Let’s not even mention the CEOs of the 4 major banks also applying pressure on them to drag out or halt any counter measures.”

        Yes Sauce. our problem is everyone is into it as you point out. So much so that it is now taught economic theory – and has been for about 50 years!

        So we arrive at Doc x’s quote below.

        The answers lie back in time.

  13. the only way to replace the crappy socioeconomic system we have is to let the system implode. Australian housing bubble is so huge and its consequent burst will make so much pain that there is good change of a birth of a new and better system in the chaos following the burst

    slow melt or burst at this stage will make so much pain onto many without providing necessary conditions for any real change

    • For sure; dramatic collapses that highlight the failings of current systems are almost a prerequisite to change them – get enough people pissed off and making changes in the face of (recently discredited) interest groups is easy.

  14. Here’s what I think will happen:

    China will continue to slow…eventually the wider market will realize their numbers are bogus

    Our mining industry will continue to retreat

    RBA will continue to cut…with diminishing returns each time…

    Until they run out of steam…

    At that point there will not be much left in the tank to stop the inevitable collapse…and the last three years on inaction will make the final catastrohphe much worse than it could have been.

    • Theres still steam? All they’ve managed to do is devalue the AUD and force afew old people onto cat food

  15. the X axis of that graph – it should read “level handsomeness of citizens” shouldn’t it?

    please make the update ASAP you are confusing the people

  16. Rent Seeking Missile

    This is going to be a doozy.

    Find a safe place for your beanbag and stock up on popcorn.

  17. I’m thinking of buying this weekend in Eastern suburbs Melbourne. I’ve been waiting for 5 years thinking the market was going to crash in 2010 when I sold my properly and started renting. Waiting…. Waiting…. Now the pressure for a family a pad that doesn’t have landlords kicking us out every year or two is high. Any way I’ll be mortgaged up to the eyeballs soon & most likely will have a house worth half what I buy it for in about 5 years time. Hopefully I’m the muzz that pops this bubble & saves money for the rest of us…

  18. pyjamasbeforechrist

    1. The bubble
    2. The pin
    3. Contact

    This is now my go too image for explaining that number 1 exists.

  19. And for those who think our bank are safe…

    So a partial impairment on $365 million in debt is enough to send a German bank, which according to its latest interim financial report, had €10.9 billion in assets, into full out insolvency? As if the ECB’s farcical stress tests needed any further validation they are nothing but the worst possible joke on Europe’s depositors Goldman’s head of the ECB could have conceived.

    Because if a 1.5% write down in the assets of a supposedly well-capitalized German bank can lead to almost overnight insolvency, one can almost imagine what will happen when the Austrian black swan wave reaches Europe’s actually “undercapitalized” banks…