Joye tells lunatic RBA to “pull its head in”

Bravo Chris Joye who appears to be the only other writer with any balls or brains in the financial press today:

RBA governor Phil Lowe needs to pull his head in. It’s fine for him to tell the banks to loosen their lending standards, but he isn’t the one being sued by ASIC on the basis of an entirely fallacious interpretation of Labor’s 2009 responsible lending laws.

…The banks are justifiably assuming a worst-case scenario whereby ASIC and the royal commission’s “activist”, or non-literal, reading of the laws are somehow validated by the courts, even if this is a very low-probability contingency.

…It should not be forgotten here that it was Lowe’s RBA who bequeathed us the mother of all housing bubbles with its irresponsibly low cash rate, which Lowe is frustrated he cannot now raise because it would exacerbate the housing correction.

…Thank heavens for APRA, the world’s leading banking regulator, which, notwithstanding the RBA’s historic poo-pooing of the efficacy of “macro-prudential” constraints on credit creation, aggressively reined in lending back in December 2014. Initially it was the application of the 10 per cent speed limit on investment loan growth coupled with a minimum interest rate of 7 per cent when assessing a borrower’s servicing capacity. (If banks did modestly underestimate borrowers’ spending habits, they massively overestimated their repayment costs.)

…One of the least recognised policy triumphs in recent times has been APRA’s orderly deflation of the worst housing bubble ever recorded (based on the house-price-to-income and household-debt-to-income ratios).

Not exactly my own argument but close enough. Pull your head indeed, Phil Lowe.


  1. Any sort of lunacy on the way up is apparently fine, but if it deflates at anywhere near the rate it has inflated over the last 6 or seven years, there’ll be all sorts of panic and cries of “disorderly deflation”.

    How anyone thinks the inflation of the bubble was in any way “orderly” is utterly beyond me.

    • Lowe’s RBA? TBF I think it was largely Glenn Stevens’ fault. He left Lowe no room to move in either direction until its too late.

  2. Oh dear!

    Are we getting any closer to the point where the great and beautiful minds that control our economic destiny concede that having a bunch of “independent of the public interest” regulators running a privatized public monetary system is a dud model.

    Nope did not think so.

    For those of you interested in an alternative that addresses at least some of the more loony aspects of the current public monetary arrangements

  3. proofreadersMEMBER

    “Thank heavens for APRA, the world’s leading banking regulator”

    Seriously LOL. Chris must have had one Xmas drink too many which caused the above brain explosion.

    • Meh the problem would be worse if they didn’t do something. I do agree with Joye on one thing – the current fall is a result of the RC and a very pessimistic interpretation of the law. In a royal commission environment it’s rational behaviour – to the banks this probably is like a witch hunt especially since they aren’t all that popular. They are looking for things wrong to punish which I guess is their purpose; even non-deliberate decisions (e.g. negligence) will be looked upon heavily.

    • Even StevenMEMBER

      World’s leading regulator? I suspect there was more than a little bit of luck – several handfuls!

      But so far, there hasn’t been even a hint of an institution failing. In fact, RBA telling banks to open the credit faucets on full suggests they are well away from major concerns… at least at this point.

      One thing I do fully agree with joye on is that the macroprudential controls have precipated the property downturn. The softening started well before the RC.

      MB was right. Lower interest rates combined with MP can effectively channel credit more productively. Still not sure why people sneer at this dynamic.

  4. proofreadersMEMBER

    “RBA governor Phil Lowe needs to pull his head in.”

    True, particularly in calling for the banks to continue their irresponsible lending (when he must realise that their existing books are full of IEDs). However, let’s give credit where credit is also deservedly due (no pun intended), to the creator of the most immaculate housing price bubble: Captain Glenn, eagerly assisted by avaricious banks and docile regulators.

  5. “it was Lowe’s RBA who bequeathed us the mother of all housing bubbles with its irresponsibly low cash rate”

    Ummm …it WAS MB policy as well!!!!!

    • Yeah, I wish MB would sort this out mentally. One can’t complain about low rates causing asset bubbles and wealth inequality, then complain about rates not being low enough.

      If the bubble is bad, get rid of the bubble by raising rates. Humans are very smart, adaptable creatures, we’ll survive. Let this FIRE pig roast itself and we’ll start over.

      • MB’s calls were to lower the rate to ease the dollar but to stop the market going bonkers with MP(lol)

    • I’ve always interpreted MB’s comments on lowering IRs as more a commentary on what the RBA ought to do from the RBA’s own point of view, as opposed to being MB’s own opinion on the matter…it is, therefore simply pragmatic commentary based on the status quo.

      Keep in mind that the MB writers generally have an Austrian view if the world, and would generally gladly keep IRs “higher” to minimise speculative crack-up-booms and other malinvestments, rather than deliberately stoke fires…

      My 2c

      • Burb
        MB has simply absolutely refused to engage ANY discussion onj the REAL underying problems of modern economic theory especially in regard to IR’s. Their analysis is shallow and unthinking.
        Lowering interst rates to an ever lower RAT negative level is just further distortion of an economy already distorted by demonstrably false economic policy. Distortions on distortions fix nothing- they just make everything worse.

        MB policy is to lower rates so that the A$ falls but with the aim of stopping any and all good effects of the fall in the A$ – especi8ally to maintain out of control excess consumption

  6. Joye just want to buy cheap house and see economy of Australia recession and worthless Australia dollar. The house price of Sydney is cheapest of all big cities all over the world at moment and it is incredible.

  7. So Chris Joye’s a lawyer now? Sorry, but somehow I think Hayne has somewhat more experience in interpreting the law than Joye and I’m dead certain he has a much higher ranking in his profession than Joye has in his.