Go for it Callam Pickering at locked-BS:
On October 1, the Reserve Bank of New Zealand introduced temporary restrictions on residential mortgage lending, with high loan-to-valuation ratios….Since the restrictions were implemented in October, the New Zealand housing market has slowed rapidly. Both housing loans and house prices are now on the decline and risky lending by low income households has dropped significantly.
…Australia is very much part of the housing boom and bust cycle. House prices have fallen significantly on two separate occasions since the onset of the global financial crisis, despite the fact that we avoided a significant slowdown in the broader economy.
…Macroprudential policies are one way to address a housing market that has become increasingly volatile. But these policies are not about saying that a bust is imminent. Rather it is an acknowledgement that no matter how smart you are or how many analysts you have there is a good chance that your economic forecasts will be wrong more often than they are right. Just ask the RBA.
…Macroprudential policies allow the RBA and Australian Prudential Regulation Authority to address the latter without removing the benefits of low interest rates for the rest of the economy. If the RBA wants to keep rates low, and they should, then they must follow the lead of the RBNZ.
Pickering doesn’t mention the most important point, that macroprudential policies would smash the dollar lower as well, providing huge stimulus in all of the right places. Bravo nonetheless.
