Via the AFR:
The OECD is urging Australia to begin increasing official interest rates, even if inflation remains weak, to cool the housing market and prevent a blowout in risky debt levels.
Forecasting solid economic growth and falling unemployment over the next two years, the OECD said it was time for both monetary and fiscal support to be “gradually withdrawn”.
The Organisation for Economic Co-operation and Development’s latest world economic outlook argues that the Reserve Bank of Australia is likely to begin hiking the official cash rate in the second half of 2018 as a pickup in wages and prices becomes more entrenched.
“A tighter policy stance will ease pressures on house prices and will reduce the threat of the build-up of other financial distortions” in Australia, they said in their report published in Paris on Tuesday.
Oh dear. Fiscal support is the only thing driving the economy via the Federal deficit and state government infrastructure. Pulling it and hiking rates would have us in recession in months probably weeks as:
- house price falls accelerate;
- household consumption evaporates;
- dwelling construction sinks;
- fiscal austerity bites;
- business investment stalls,
- all just in time for the end of the net exports boom.
Of course, it may not be a bad idea, given it is unavoidable anyway, but the OECD reckons it will happen as growth smoothly accelerates.
Deluded!
