From BS, CBA CEO Ian Narev:
“We all know that in a sustained low-interest rate environment these risks exist and we’ve got to be alive to them,” he said.
The best defence against housing bubbles is “good, conservative, prudent bank management,” which was evident in Australia’s banks, he said.
Mr Narev said there should be ongoing conversations with regulators and government, but he saw no immediate need for discussions about the settings.
“If you look at the fundamental drivers of supply and demand, demand for housing versus the supply of housing, all those economic figures, they are telling you that the underpinning of property prices right at the moment is easily justifiable on good sustainable levels of supply and demand.
“That doesn’t sound like a bubble to me. But we’ve got to realise that if we’re in a sustained period of low interest rates, it’s something we’ve got to keep our eyes open.”
A bubble is an investment mania built on a kernel of truth that gets blown out of proportion. That is what we have in Sydney, building on the existing overvaluation of national housing, another definition of a bubble.
Meanwhile, ANZ backpedals on Phil Chronican’s recent excellent comments supporting macroprudential:
ANZ chairman John Morschel has become the latest business leader to dismiss concerns of a housing bubble.
“I don’t believe it’s a bubble. It might be two years down the track but I don’t believe it’s a bubble at the moment,” he said at a lunch in Sydney.
Mr Morschel said the ANZ board kept a close eye on how much risk the bank was taking in its mortgage book, and criticised New Zealand’s tighter rules on lending to people with deposits of less than 20 per cent of the property’s value.
He likened the policy to using a ‘sledge hammer to crack a walnut.’
Actually, it’s using a sledge hammer on a large bank that can’t fathom that the time to attend to risk is two years before its two years too late.
