From BS this afternoon comes good work from newbie Callam Pickering:
The Australian housing market is worth over $4 trillion and housing debt accounts for over 90 per cent of all household debt and around 60 per cent of all household wealth.
…The sector is a systemic risk to the broader economy and, even if you do not believe that we have a bubble, the risk of a downturn is such that you should at least favour mitigating the potential fallout of that risk should it eventuate.
Realistically, all it will take for house prices to fall significantly is the underperformance of the non-mining sector over the next few years. The circumstances for this are already in motion, with the exchange rate ‘uncomfortably high’ and uncertainty surrounding the Fed’s taper. If the Australian dollar does not depreciate then we may face the most arduous economic conditions since the early 1990s and a housing market to match.
…Recently, the Reserve Bank of New Zealand launched policies designed to slow risky lending due to concerns that their market had become overheated.
If successful, the RBA and APRA should follow suit to mitigate the risk of a housing downturn. Macroprudential polices would also provide greater scope for the RBA to lower interest rates in order to boost other sectors of the economy.
Pickering is a fresh escapee from the Martin Place asylum so I wonder if he’s got sources at the bank suggesting an announcement from Capt’ Glenn in his big speech tomorrow.
Just askin’!
