The AFR’s John Kehoe has shown ability recently but he’s got a bit of a shocker up today. Here ’tis:
The problem with the current emotionally charged debate over whether Australia is experiencing a risky house price bubble is that the discussion is filled with vested interests.
It is not in the interests of a bank executive, real estate agent, property developer or home owner to warn that prices have climbed too far ahead of fundamentals.
Conversely, those yet to buy a home and hedge funds shorting the shares of Australian banks have self interest in talking the market down.
So making sense of this complex issue is difficult.
One group of people who are well-placed to make an informed and impartial judgment on the housing market are Australia’s financial regulators.
Fallacy number one: ad hominem. Marginalising everyone in the housing debate because they all have an interest is very obviously wrong. For example, I own a home but I’m not defending the current housing market. There are plenty like me including all sorts of uninterested researchers. The journalist’s job is to determine which source is trustworthy not to condemn them all equally.
That faulty assumption leads him to a bogus conclusion:
The Reserve Bank of Australia and Australian Prudential Regulation Authority have teams of staff dedicated to closely analysing the housing market and lending practices of our banks.
The very senior people in these organisations have some of the sharpest minds around and spend a great deal of time thinking about these issues.
Even though the regulators are not flawless, observing the housing market through the lens of the RBA and APRA is at least worth considering.
Right now, the financial regulators are alert to the risks of the recent surge in house prices. But they are not yet alarmed.
Fallacy number two: circular argument. We should trust regulators because they are trustworthy. No evidence offered of them being so and no history to support the supposition. No evidence even to prove that they are without bias. The article goes on with the usual arguments for why there is no bubble: ratios, credit growth, conservative banks etc.
The recent history of regulatory failure, including in Australia, leads me to conclude a little more skepticism is healthy. Enough at least to ensure the use of proper dialectic.
