The RBA statement made is all quite clear that it is now relying on APRA to weigh on house prices:
Indications are that the effects of supervisory measures have strengthened lending standards in the housing market. Separately, a number of lenders are also taking a more cautious attitude to lending in certain segments. Dwelling prices have begun to rise again recently. But considerable supply of apartments is scheduled to come on stream over the next couple of years, particularly in the eastern capital cities.
It’s clear that house prices are firm with investor lending growth at 5% for major banks according to APRA data:
APRA’s 10% cap is far too loose and banks are moving to fill it back up. With incomes going backwards and nominal GDP at 2%, property speculator credit growth at 5% is more than sufficient.
This is made all the more urgent by the shift down in the US economy registered in Friday night’s data. The RBA is going to see more and more pressure to cut as the Australian dollar remains too high and adds tradable disinflation to non-tradable. We see that already today as the dollar marches on the RBA hold.
If APRA tightened its investor lending cap to 5% it would send a clear message to the banks and housing market that it will not tolerate excess, without harming the market at all, and it will liberate the RBA to get on with its easing.
For God’s sake, APRA, tighten now.
