From the Q&A of Captain Glenn’s speech today:
“What is happening in housing in Sydney I find acutely concerning for a host of reasons many of which are not to do with monetary policy…I think it is a social problem.”
“Yes I am very concerned about Sydney and some of what is happening is crazy, but we have a national focus and so that just increases the complexity.”
Yes, it is completely bonkers and has been for two years:
But don’t be fooled by the it’s not national mantra. It is national in differing degrees. Sydney is still roughly at the same premium it has held over other cities over the long term meaning they are also “crazy”. Moreover, the Spanish, Irish and American property bubbles weren’t national either. All bubbles have epicenters.
It’s not a social problem. It is a tax, regulatory and economic structure problem and the answers are obvious, just nobody wants to take on the interests:
- stern macroprudential in short term
- supply side reform and cut negative gearing in the long
- stiffen mortgage risk weights
That’s it. Problem solved.
What does it mean that the good Captain is now openly agog at his Frankenstein?
First, markets added half a cent to the dollar during the afternoon after having dropped earlier. After all, how can Capt’ Glenn cut if he thinks property is crazy?
Second, he’ll have to cut anyway so we’re going to see total fucking insanity before one gigantic crash.
Welcome to the end game of the great Australian property bubble.
