Amusing stuff, via the ABC:
Top brass at Australia’s central bank have hit back at ABC reporting that exposed how the dire view of the housing market held by some Reserve Bank staff clashed with the rosy picture the bank’s representatives presented in public.
Staff then sought “receptive” journalists to tell their side of the story, using the offer of an on-the-record interview with a senior bank leader.
“What’s your take on the ABC reporting?” asked Jonathan Kearns, head of the bank’s Financial Stability Department.
“The items last night were so ridiculous, and have put a lot of pressure on [NAME REDACTED]. What should our threshold be for pointing out to news agencies that they’re really off the mark in their reporting?”
In June, documents from inside Australia’s central bank, including many marked “highly restricted”, showed Reserve Bank economists considered urging the Federal Government to shut down the real estate industry, “pausing” sales of established homes to avoid perceptions of a coronavirus-inspired housing market crash.
“The problem is that this will enter folklore and one day history will show we stopped publication of property prices for a while!” wrote Reserve Bank of Australia secretary Anthony Dickman, calling out a factual inaccuracy in an early report — that noted an economist’s view as that of the bank.
“Is it worth backgrounding someone that sometimes FOIs flush out musings in emails by junior officers that have no official status whatsoever?”
Assistant governor (financial system) Michele Bullock said she did not think there was “much we can do about this”.
“But if you read the material, it is a discussion between economists about how to interpret housing price data. It wasn’t a policy recommendation,” she said.
Crash fears hidden
That “discussion between economists” centred on fears of a crash in the price of housing so great — or the perceptions of one — an economist at the Reserve Bank considered asking private firms to stop telling Australians about slumping property prices.
In April, economist Nick Garvin wrote to colleagues warning them the bank should stop analysing the housing market as if it were operating normally and calling for a halt — as happens to stock trading in emergencies.
“I think it’s dangerous for regulators to be reporting on housing prices as though the market is currently functioning,” he wrote.
Sharp rise in unemployment could trigger house price crash
The spread of coronavirus across Australia could see unemployment reach about 10 per cent and house prices drop 20 per cent, says one economist.
“I’d suggest we classify the market as paused and treat the prices observed before the pause as the current prices — like how equity markets operate, but on a larger scale.”
Because real estate agents could not operate normally at the time — auctions and viewings were banned or highly restricted — the economist argued “so, ‘paused’ would be a fair classification”.
He went on: “We should also tell private sector data providers to follow this rule. If people start mistakenly thinking that we’re experiencing a housing market crash, it’s not going to help things.”
After the information was picked up by other outlets including the Australian Financial Review, the new emails show the bank’s head of communications Judy Hitchen tried to find a journalist to “write about the challenges of measurement in an unsettled market — so people understand the point [Dr Garvin] was making”.
Senior communications officer Ian Chua suggested some names, redacted in the release, of friendly journalists who might write about the topic.
“In any case, to achieve what you’re aiming for, you’d need to pitch the idea to a receptive reporter and offer an on-the-record interview as incentive,” he wrote.
“If that is on the cards, we could try to say [REDACTED] at [REDACTED] or the wires reporters.”
The bank did not go through with the plan.
Clash between public and internal views
Minutes of the board’s May 5 meeting, released publicly, noted “demand for both new and established housing had fallen” and falling incomes, confidence and population growth “were expected to affect demand for new housing for an extended period”.
But inside the RBA, which sets key interest rates and economic direction, the warnings were clearer and more severe.
“It’s become clear that there has been a big drop-off in demand for new housing,” said speaking notes of assistant governor (economic) Luci Ellis.
“Contracts are being cancelled, early-stage buyer interest is very weak and the pipeline is emptying,” it noted.
“Anything that hadn’t already been started has been deferred.”
Once the notes were made public by the ABC, Dr Ellis declined to do a media interview with an unnamed outlet.
“I have no appetite to appear,” she said.
“Personally, I didn’t see any distinction of tone between what the minutes said and what my speaking notes said (NB notes BY me, not notes FOR me as reported in the ABC story), other than one being less formal in style because they are speaking notes.”
The RBA’s reports on the deteriorating situation in construction may have influenced the announcement of the Government’s HomeBuilder program because it suggested house prices could slump up to 15 per cent.
The internal reports contradicted a much rosier view the Reserve Bank of Australia had been giving the public about the billions of dollars and millions of jobs tied up in housing, construction and real estate.
The emails came from a Freedom of Information (FOI) request for responses to the ABC’s earlier reporting of the issue.
That pretty much speaks for itself. What a pathetic bunch.
This is absolutely no surprise. The Lunatic RBA has failed utterly to meet its mandate thanks to its transformation long ago from central bank to housing bubble manager.
Sack Deflation Phil. Merge the bank with APRA. And put an experienced prudential manager in charge to clean out the heaped piles of deadwood plus inject intellectual vitality and policy process that aims to deliver on its only reason for being.