From the realty treasurer at the FT today:
Mr Morrison also sounded a warning that record-low interest rates are proving counterproductive in Australia and elsewhere, while rejecting fears a housing bubble is developing in Sydney and Melbourne.
Since the start of the year, house prices in Sydney and Melbourne have surged 13 per cent and 10 per cent respectively, according to data from Corelogic.
“There isn’t one housing market in Australia, there are hundreds of housing markets and to make generalisations is dangerous. It would be a mistake to think those [Sydney and Melbourne] were not sound,” he said. “It is hard to make an argument that where house prices are is a function of speculative, finance-driven investment. What that means is the housing debt is underpinned by real asset values.”
However, he said there are real housing affordability challenges in Australia for those people seeking to get on to the housing ladder. He said increases in housing supply over coming years would see price growth moderate.
Mr Morrison signalled he did not feel that Australian interest rates should be cut beyond their current record low level of 1.5 per cent.
“Monetary policy has exhausted its influence,” he said. “Lower rates have led people to save more, to pay down and offset their debts, rather than necessarily going out and spending in the economy,” he said. “As that has increased over time, the impact of interest rate cuts has on each occasion eroded.”
Mr Morrison said loosening monetary policy on a global scale was only bringing forward demand while the real challenge for advanced economies is to facilitate increased private demand.
“That is why we are so keen on tax arrangements that support investment,” he said.
Tax cuts for foreign speculators in isolation will do little for Australian growth, sadly. What is needed is comprehensive tax reform to shift Australia’s patterns of growth to tradable sectors over debt-driven sectors.
More from Alan Kohler:
I interviewed Treasurer Scott Morrison…on Friday, and he made it clear that that there’ll be no fiscal stimulus in Australia.
“Well, I don’t think the answer is higher debts and bigger deficits.” He told me.
“I think the public sector shouldn’t get tickets on itself in terms of the role it really plays in driving economies. Fundamentally, economies are driven by private investment, private capital, private business making decisions to invent, invest, employ, secure new markets. And that’s what we need our economy to continue doing.”
It is true that Scott Morrison is doing his best to avert further rate cuts but it’s not true that he isn’t stimulating:
He’s running a fiscal deficit at -2% of GDP, higher than 2009! It’s going to be fun when he really does “stimulate”.
Rate cuts will return in due course as well when the commodities boomlet passes in conjunction with the car industry and dwelling boom.
