Basically, at this stage, an ongoing house price bust has moved to the base case for Australia. Macroprudential has worked well. The Hayne Royal Commission has reset credit. Housing supply is flowing. Affordability is disastrous. And the immigration economy has destroyed income growth.
The question now is is there another save?
The obvious place to start is monetary policy. The cash rate is at 1.5%. We are of the view that the RBA will not want to cut below 75-100bps, leaving in place some uplift for the carry trade and offering some protection to the Australian dollar and depositors.