The Campaign for National Ignorance powers on today:
So, why so much, and why now? Because, at the present exceptionally low rates, the demand for home loans exceeds supply, with the banks under pressure from the authorities and sharemarket analysts to avoid lending too much – to ordinary home-buyers, not just investors.
If you have to cut back your rate of lending, why not do it by raising your prices? This suggest the housing boom may indeed be reaching its closing stages.
One reason the other banks may delay following Westpac is the talk that the Reserve will respond by cutting the official interest rate on Melbourne Cup day. They’d love to be able to hide a rate rise behind a less-than-full pass-through of a rate cut.
The Reserve may oblige, but I won’t be holding my breath. Nothing in its rhetoric to date suggests it’s keen to cut rather than wait. And I doubt if it would want to be seen as trying to prolong the house-price boom.
I ask you Mr Gittins, what is the RBA going to do as the housing boom ends, residential construction begins to shed jobs, the mining capex cliff crashes on, the car industry shutters and the terms of trade income shock persists?
It won’t do nothing, that’s for sure. The question is, will more rate cuts matter a damn?
