From the AFR, the bubble drum is beating hard, with Ric Deverell, head of global commodities, foreign exchange and Asia strategy at Credit Suisse in London and former Reserve Bank deputy head of economic research coming out:
“House prices are popping, Sydney is going berserk,” said Ric Deverell, head of global commodities, foreign exchange and Asia strategy at Credit Suisse in London and former Reserve Bank deputy head of economic research. “That will worry them enormously, although they won’t admit it,” Mr Deverell said.
“It is really difficult for the RBA at the moment. They have a positive cash rate so they can control monetary conditions but they are getting the wrong monetary conditions,” he said.
“What they would rather is have a higher or the same cash rate and a weaker exchange rate.”
“You need housing construction – it’s the big one – to come on line. The problem with that is, as we know particularly in Sydney, there are a whole lot of structural issues around the periphery, which make it difficult for that to kick in.”
…“I think the Australian dollar has to fall a lot in the next year.
“I don’t think we have to have a recession but, you know, to avoid a recession you need the exchange rate to come down substantially.”
The obvious solution is macroprudential. Mr Deverell thought it unlikely.
Pardon me for saying so, but this is ridiculous.
