From locked-BS comes sense from Callam Pickering
The RBA minutes, released yesterday, suggest that macroprudential policies are gaining traction among senior officials and members of the board. At its March meeting, members discussed the experience of other countries that have utilised macroprudential policies and their possible application for Australia.
…A recent Freedom of Information request provided some insight into the RBA’s recent thinking. Among the macroprudential policy tools examined, including New Zealand-style caps on high loan-to-valuation ratios, the RBA head of financial stability Luci Ellis believes that “the most promising policy response seems to be to introduce a regulatory regime that automatically requires larger interest buffers in loan affordability calculations when interest rates are low”.
…Macroprudential policies could create the best of both worlds for the RBA. They can slow the housing sector but also maintain support for other sectors of the economy that are still in a bit of a rut. Interest rates, on their own, are likely to be too blunt an instrument to balance the needs of the housing market and the broader economy.
Macroprudential now!
