What do house prices do to jobs?

This is so bad I don’t know where to look, from HSBC’s Bloxo:

  • It is clear that the bar for the RBA cutting its cash rate is very high. It remains our view that while the labour market still has positive momentum the RBA will be able to credibly argue that wages growth should continue to rise and that should be enough to keep them from considering cutting the cash rate. In our view, the RBA would need to believe that the unemployment rate was set to rise materially (most likely to 5.5%) before they would consider cutting the cash rate.
  • Our central case is that the unemployment rate will continue to edge lower in coming quarters. This is also conditioned on our economists’ positive view on the global outlook, and particularly China. However, if it turns out that global growth weakens more sharply, or that China has a hard landing, the RBA would clearly have considerable scope to deliver policy stimulus.

Meh. The RBA will do what markets tell it to. If the bar was so very high then why has it already shifted to a neutral from a tightening bias?

As well, leading indicators already say unemployment is going to rise and when it does the RBA will cut. This should come as no surprise to any economist, via UBS:

A couple of UE points will do it. But, whenever the RBA does cut it’s going to make bugger all difference domestically because it has very little easing left given the banks will only pass on half.

Bloxo has been wrong year after year in this cycle. Time to stop doubling down.

David Llewellyn-Smith


  1. typically unemployment hits decades low records just before bubble bursts – we were underachievers on this issue so are starting from already historically high unemployment

  2. reusachtigeMEMBER

    Nothing really. But a better job will get you a better priced house, something to aspire to.

  3. Interest rates are 1.50% The RBA are effectively facing a ravening horde of housing zombies with a six shot revolver.

    They can’t afford to waste a single bullet.

      • The Young British Soldier
        “…When you’re wounded and left on Afghanistan’s plains,
        And the women come out to cut up what remains,
        Jest roll to your rifle and blow out your brains 
        An’ go to your Gawd like a soldier…”

    • nexus789MEMBER

      The RBA is a pointless entity. They should shutter the place and turn it into a hotel.

  4. Jumping jack flash

    “A couple of UE points will do it. But, whenever the RBA does cut it’s going to make bugger all difference domestically because it has very little easing left given the banks will only pass on half.”


    Personally I doubt they will cut at all, even at 5.5 UE, because exactly as you say, cutting will do very little, so as soon as the RBA show their hand everyone will see that it is crap, and then the real fun starts.

    • DominicMEMBER

      Exactly. They cut rates and …… nothing.

      At that point they’re exposed for the quacks they always were! It’s their egos I feel sorry for.

  5. Rate cut drops Dollar and increases inflation for all things imported … Not going to happen, let housing reajust to realistic affordable levels and some private bankruptcies

    • agree.

      don’t we still run a current account deficit?

      lower aud will lower living standards.

  6. If he wants a board position one day he is staying on message. No doubt his efforts are not going unnoticed.

  7. A sabotaged property market (with supply rendered inelastic) is like an aggressive cancer in an economy. Central Bankers interest rates are like chemotherapy; where you can only kill the cancer by killing the patient in the process. So what do house prices do to jobs? Kill them via the interest rates necessary to cool the bubble. A 2010 OECD report, “A Bird’s Eye View of OECD Housing Markets” helpfully pointed out:

    “…Another concern is about the ability of monetary policy to thwart the development of a housing bubble without causing widespread damage to the rest of the economy. In a house price boom, prices increase strongly – often at double digit rates – and expectations of future prices are similarly upbeat.
    Under these conditions, large policy rate hikes would be necessary to cool housing markets. High interest rates would crowd out sound and socially useful investments…”

  8. In the USA, the housing crash caused unemployment to begin the negative feedback doom loop, and not the other way around. Same is true here. Look out below! (Does Australia have Roadrunners?)