If you want to know why the dollar isn’t falling and we’ve got Dutch disease don’t look at other central banks, just look at today’s Housing Finance data:
Housing investors are going berserk. And where are they putting the debt?
Into existing stock, which is sending house prices in Sydney to the moon, with Melbourne trailing.
The stated goal of the RBA’s rebalancing is to allow house price rises to push up dwelling construction. And the year on year for new dwelling finance still shows growth is rising:
But that is in part because new dwelling finance was so low at this time last year. On the the monthly chart there has been no growth since March:
In short, the RBA campaign of financial repression has added a speculator’s blowoff to the long term Australian housing bubble and it’s getting modest construction activity in return for this extraordinary gamble.
It’s not all the bank’s fault. Government is useless on planning and tax reform to boost growth. But if we continue down this path we’ll have huge asset bubbles in our two biggest cities with a few new houses and no non-resources tradable sector to speak of.
Macroprudential now.
