Still building the housing time bomb

The first page of the housing time bomb recipe reads.


  • Unrestrained credit growth
  • Central Bank denial
  • Government incentives
  • Government intervention.
  • False promises; containing 1 parts population, 1 part underlying demand and 1 part undersupply.


Allow unrestrained credit to outgrow income by a factor of 6 adding government incentives and central bank denial as required. After 8 years of mixing wait for mixture to fall slightly, then desperately add government intervention and a heaped tablespoon of false promises. The mixture should rise quickly then fall at a similar rate, when this occurs it is time to prepare the fuse.

We seem to have lost the page that describes how to make the fuse, but thats ok, because we found some ingredients today that we think will do.

As we talked about in early October the banking Admirals are getting restless about their profit margins. Today we note that once again the CBA boss has left no doubt about his intentions; indebted be damned.

Commonwealth Bank chief executive Ralph Norris says the rising cost of funding will push up interest rates independent of changes to the central bank’s cash rate.

“There is no doubt when we look at the current cost of funding that rates are going to increase,” Mr Norris told media following a business lunch in Sydney on Thursday.

We can only guess he accidentally read one of his own stress test reports and believed it.

We also note that the high AUD seems to be killing off what was left of the overseas “investment” in the capital cities, and as we reported recently student intake is falling off a cliff.

INDIAN student enrolments at Australian universities are set to plunge by at least 80 per cent in the 2011 academic year, a leading academic says.
Melbourne University vice-chancellor Glyn Davis warns that higher education across the country, including Victoria where it is the state’s biggest export earner, is taking a massive hit after reports of attacks against students from the sub-continent.

“According to our best sources … the fall in applications from India into Australian tertiary education … are predicting at around 80 per cent, some institutions are reporting up to 90,” Professor Davis told reporters in Melbourne

Mix in a good dose of falling demand from first home buyers and investors and it looks like we might just be there. What is that ticking noise??

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