From the AFR this morning comes more from the Q&A session following yesterday’s Phil Lowe speech:
The Reserve Bank of Australia has signalled it will closely watch for the danger of a new home price bubble after its cut in the official interest rate last week to a near-emergency low.
Home prices remained “a very important issue and it’s unclear how things are going to work out,” RBA deputy governor Philip Lowe said on Tuesday.
Dr Lowe likened the situation in Australia to that of other resilient economies with “quite a low interest rate” and a high exchange rate.
“In a number of other countries that have this combination of high exchange rates and low interest rates, you do see pressures building in the housing market and that’s something we’ll need to watch very carefully.”
…Dr Lowe said fewer loan approvals and “low” property prices suggested there were not “many signs of exuberance returning to the housing market”. But if exuberance returned “it would raise concerns”, Dr Lowe said.
Dr Lowe said that with “the peak in mining investment now coming into view”, it was important other drivers of growth and employment emerged.
Hmmm, not sure about “low” prices but somewhat reassuring. Lowe is a housing bubble doyen, having written an agenda-setting study at the BIS and also politely whacking Ian Macfarlane for his easing money policies in the late nineties.
The RBA really needs to get help with additional tools of the macro-prudential variety.
