In the Q&A session to today’s speech, RBA deputy Phil Lowe warned about rising housing risks, which has necessitated regulatory action to slow mortgage credit growth. From The AFR:
“My subjective assessment would be the level of risk in bank mortgage portfolios has risen over the past couple of years”…
“Household debt is high, property prices are very high, household income growth is slow, the unemployment rate has drifted up – all those things would suggest there has been an increase in the level of risk, particularly as people have bought property for investment purposes”.
“In that environment, it is entirely appropriate [the banking regulator] APRA has a very close dialogue with financial institutions about the risks in those portfolios, and makes sure there are plenty of buffers there in case things don’t turn out so well.”
While the RBA’s warnings are welcome, they are far too late to the party.
The RBA spent the better part of two years arguing against regulatory measures to curb housing speculation, only to change its view only recently at the eleventh hour.
At times, the RBA has also resorted to defending the bubble, releasing papers and speeches arguing that Australian housing values and household debt are not out of whack globally and/or are built on fundamentals, or cheering on the Dutch disease caused by the commodity boom, which for a while it stupidly viewed as permanent.
It’s a bit hard to have confidence in the RBA when they’ve stood silently on the sidelines and allowed policy stupidity to reign supreme.
