The MB victory lap

Here it is in black and white from the RBA statement:

Credit growth picked up to moderate rates in 2014, with stronger growth in lending to investors in housing assets. Dwelling prices have continued to rise strongly in Sydney, though trends have been more varied in a number of other cities over recent months. The Bank is working with other regulators to assess and contain economic risks that may arise from the housing market.

The Australian dollar has declined noticeably against a rising US dollar over recent months, though less so against a basket of currencies. It remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices. A lower exchange rate is likely to be needed to achieve balanced growth in the economy.

Macroprudential policy made this rate cut and falling currency possible.

It’s hard to believe that MB introduced the idea of MP to the Australian economic discourse in 2011 when this rate cutting cycle first got going. Since then we championed it, argued against its detractors, pushed the regulators (even presented in person), last year remained the sole rate forecaster calling rates lower, and got the policy up so that Australia can defend itself against a world intent on stealing the productive base of our economy.

Many of you are concerned about the effect that more rate cuts will have on house prices, so are we, and regulators have not followed MB’s advice by deploying a structured and firm MP program, that would have kept a lid on the property market. However, they may still succeed with their own brand of behind-the-scenes prudential tightening. Let’s hope so.

For today, at least, Australia and its economic prospects took a belated but large step forward.


Houses and Holes


  1. Seems we are a few years behind the low rates, deflationary, high asset price (excluding housing) position of most economies. ASX to fly over the next two years as the others did?

    • It’s a good question. We are also behind everyone else in the economic cycle so earnings are not going to help.

      If price rises anyway then we could easily find ourselves in bubble territory even as the economy falls away.

      I started the year thinking the ASX would finish it lower but I think you’re right. The yield plays are gonna fly.

      • Since then we championed it, argued against its detractors, pushed the regulators (even presented in person), and got the policy up so that Australia can defend itself against a world intent on stealing the productive base of our economy.

        It’s very concerning that it takes a site like this to get a commonsense approach to economics adopted by regulators.

        Why could NZ see it without all the coaxing?

        We need leadership change in more than just the PM’s office….

    • I distinctly recall last September or so the RBA said they would have MP proposals in the public domain by year end (2014). There has been nothing.
      HnH, your piece here suggests that the debate has taken place, systems and controls are in place all is under control…..where on earth did you get that idea?

      Surely all this cut will do is add a booster to the IP circus??

  2. Careful with blowing your own horn. You will unleash the wrath of Australia’s Tall Poppy Syndrome before you know it.

    There is a reason I pay to read your thoughts.

    • Yeah, I’m still confused. I understand getting a call right, sure. But is MB dancing on the dead bodies of us savers and financially repressed?

      • Perma, and there is more of you out there than many think.
        That you are keeping quiet and to yourselves is not doing your cause any good. Yo need to start ripping it up the politicians, you will probably have their ear for the next few months.WW

      • That’s the feeling, particularly because there is ZERO MP and interest rates have been slashed. MP should have been introduced prior to slashing – and the RBA would’ve been well within their role to request APRA implement prior to any slashing.

      • How so WW? Nobody listens to the young. In my circles of friends, those that are employed almost certainly have bought into the ponzi. Those that aren’t, dream of doing so. The only sane ones left rear their heads in the comments here now and then. I have little hope we can change anything.

    • You reckon this is about providing information to paid subscribers ?

      Roubini summed it up perfectly – this is ALL ABOUT PUSHING YOUR BOOKS.

      If you are looking at it from an ECONOMICS point of view – no doubt about it – hold on rates.

      If you are a trader looking to PROFIT – RATE CUTS.

      This is precisely why this blog has a credibility issue – one minute they are talking about economics, credibility, macro-views – next minute they are blowing their own horn championing what are clearly private vested interests.

      Really is a shocking conflict and as obvious as Abbott’s ineptitude.

      • Who will invest in Australian property now that we have a bombing dollar and a bombing PM rating.

        Australia is just a little too stinky for overseas property investors now.

        Public perception is our new Macroprudential

      • haha yeah he must’ve called in a fav to GS – “mate there’s a bit of heat on me… help a brother out?”

    • Macroprudential tools have been in use for quite some time now. The fact that you can’t see them doesn’t mean they don’t exist, and nor do they need to be draconian or punitive in nature.

      • C.M.BurnsMEMBER

        If the resident mortgage broker is talking about existing macroprudential in a neutral manner then they must be pretty weak and ineffectual.

        Business as usual at the bubble pump Pete ?

      • APRA have drawn a line in the sand on serviceability, so we will find out pretty soon whether the line is going to be respected.

  3. It was very obvious to many of us that economic management of an economy like Australia’s demanded currency protection. The RBA are clueless stooges.

  4. You would have thought that BEFORE the RBA poured more fuel on the fire they would have thought through and played the MP plan today – not sometime in the never never – BUT TODAY.

    Talk about playing MP straight into APRA’s court for more dithering.

    Surely they can see the leverage and the risk in play now?

    When it all goes pear shape that class action is going to look pretty expensive!

  5. General Disarray

    Stewie Griffin would be a more appropriate picture.

    “Victory is mine” only to be foiled at a later point.

  6. “….However, they may still succeed with their own brand of behind-the-scenes prudential tightening. Let’s hope so….”

    Why would APRA and the RBA do anything of the sort.

    Why would they trim the sails of the very people their policies are aimed at.

    The only reason for cutting rates is to encourage new debt.

    The only people who are interested in new debt are

    1. Speculators missing the fear gene

    2. Chump FHBs who are buying but staying at home with mum and dad.

    Business is not borrowing as they know an economy running on speculator fumes is no basis for real investment.

    Normal people are not borrowing – most are like tmarsh – paying down their loans as fast as they can.

    Savers are not spending as the RBA keeps reducing their incomes.

    The RBA and APRA are a farce but only because our politicians starting with Howard decided to wash their hands of responsibility for the economy and encourage the privatisation of public finances.

    It was a predictable performance by the RBA today as they are simply playing their part in the economic model set down by the last three Australian governments (Howard, Rudd, Abbott) but a very sad one for Australia.

    Yes – A victory for MB

    But we are talking about spotting the arrival advanced economic dementia downunder.

  7. Unfortunately you’ll get the same public recognition as received for MB’s front running on IO pricing.

  8. C.M.BurnsMEMBER

    Not sure a victory lap is warranted. You guys championed lower rates with MP. We got lower rates but no MP.

    Are you at MB going to accept that you’ve now contributed to further significant inflation of our housing bubble ? And what about what comes next ?

    *Of course if the RBA/APRA do implement MP in the very near future then all is forgiven…. but that is one almighty long-shot IF.

  9. Victory Lap? Sure, right on rates, but isn’t that a bit premature in the absence of a well defined and to be seriously implemented MP policy? If a serious MP does not pan out, and the housing bubble inflates till it bursts, MB is going to have an egg on its face for cheering this on…

      • Ah Marshy, I’ve been doing the calculations, you need to sell 146 thousand avocados and 6000 dozen eggs, to pay off the house account. I’ll be down to buy some. WW

      • Eggs- $4.50/doz.
        Did you factor in my killer pickled Jalapeño jars (large) at $4 ea
        Or Blood grapefruit marmalade $4 jar
        Or Trinidad Moruga Scorpion seedlings (fk those things are hot)

        I think you’re about right with the eggs and avos. Bump those numbers slightly

        Let’s go for 5 years

        Sh$t, I need more avos
        And less feral cats

  10. mine-otour in a china shop

    Yes a victory lap – but we are all doomsdayers surely and the victory must be muted.

    We lapped Evans, The Kouk, Stevens and many others a few years back – We also passed Bloxo and the Pascometer at the same time (but they were going the wrong way round the track).

    Keep up the good work backed by evidence and proper economic analysis and keep up the policy pressures that might just help get us out of this mess.

  11. reusachtigeMEMBER

    Youse here at Macro Business don’t realise how great this is for us property investors… Wooh HOO!!!

  12. Why would anyone of the savers expect some compassion from former financial managers and traders? They can write what you want to hear sometimes, but deep down they are celebrating the rate cut, because it is good for them and always good for them.

      • migtronixMEMBER

        Yup Esco, you’re bad for all that “hoarding” — unless the “savings” are an equity loan – then you’re apples!

      • I own a home without a mortgage.

        I have savings…. enough to buy an average house…

        With interest rates so low, I’m torn between cheering house prices to the moon and being remorseful for not getting an adequate return on my savings.

        I feel a weird sick feeling – Like dancing with your sister.

      • Very good John.

        I’ll pay that.

        Actually took my sister to her formal…
        She was at an all girls school.


        Weird weird weird

  13. Well done David, Leith, Chis, DE, (have I forgotten someone ??)… and thanks

    And well done RBA…

  14. From article:

    “For today, at least, Australia and its economic prospects took a belated but large step forward.”

    I have a difficult time making sense of this statement. How is dropping rates to 2.25% qualifies as a large step forward? What about the fundamental structural problems that policy makers consistently refuse to address?

  15. “Macroprudential policy made this rate cut and falling currency possible.”

    C’mon guys … seriously?? If a little APRA jawboning of lenders constitutes Macroprudential (lite) then you should be hanging your head in shame for being so easily hoodwinked by the APRA/RBA/FIRE cartel.

    Let’s be honest. There is no genuine MP policy in Australia. Threatening the banks with more scrutiny of “risky lending practices” is basic prudential regulation, not macroprudential!

    New Zealand has shown the way here and even they have ongoing problems with housing puffery. Unbelievable negligence from the RBA to do this without coordinating genuine MP with APRA.

    A thought for parents: as humans who need shelter, we’re all long housing, unfortunately. When you own a house and have three kids, your family has effectively shorted Oz real estate (unless you bought three IPs at the same time!).

    Won’t anyone think of the children??

  16. Oh please FFS there is not going to be any MP, this is a pure and simple and plain boost to the housing bubble.

    Lets see it for what it is and stop the BS and back slapping.

  17. I think you’re reading a little too much into it. How long has the RBA and other regulators been tickling the end of our collective penii with the prospect of macroprudential?

    Like every other time, I don’t think this is it.

  18. Macroprudential is crap, a central banker can never spot a bubble until its too late. Greenspan admitted it, we should abolish all central banks, fiat money and fractional reserve. Its all ponzi-scheme Madoff nonsense.