Thank God for Gotti who today takes a page right out of the MB playbook:
The new environment comes about because banks are currently imposing a mini credit squeeze on home lending.
Dwelling prices are created by a multitude of factors, but by far the greatest is the availability of bank credit. A large number of buyers calculate what they can pay for a dwelling by determining what the bank will lend them.
…If interest rates continue to fall, then the stress tests may need to be tightened further in order to restrict growth and avoid the need for raising more capital.
What many banks are doing to keep the wheels of growth turning is to look for sound small enterprises to lend to.
Meanwhile, this new home lending situation has come about at a critical time because the Australian dollar is now holding close to the US76c mark, when the Reserve Bank is looking for a currency exchange rate below US70c.
Given that Australian interest rates are higher than other countries of similar standing, money is now flowing Down Under which works to boost the currency and some are forecasting that the exchange rate could rise as high as US80c.
Thanks to APRA, the Reserve Bank can now attack the currency with lower rates without the risk of putting a rocket under house prices.
QED. Just get on with it RBA and APRA, co-ordinate through the Council of Financial Regulators or watch your “rebalancing” sink.
And perhaps even Malcolm Turnbull might take a lesson from what banks will do if you stop giving them free credit growth into a tax-payer supported housing bubble. Lend to business!
Meanwhile, at the AFR, the US is upset:
The Reserve Bank of Australia has been criticised by the US government for talking down the Australian currency, suggesting those efforts have breached international commitments to letting the market operate freely.
The US Treasury said it “expressed concern” that the Reserve Bank had tried to change the direction of the Australian dollar.
Very amusing. Glass houses and all of that.
