Lunatic RBA property bubble autocrats spew at ABC expose

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.

David Llewellyn-Smith
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Comments

  1. PaperRooDogMEMBER

    ABC going to be told another journo needs to help out Emma around her garden just for doing their job too well, in 3, 2, …

  2. So? The RBA charter states its mission clearly: the stability of the property prices in Australia; the maintenance of full property bubble of Australia; and the economic prosperity and welfare of property investors in Australia.

    • Achilles Tskakis

      It would be interesting to know how many members of the RBA own investment properties. Surely there’s a conflict of interest if they do?

    • Their one and only, extremely overpaid remit. May as well shut them down and get Scumo to do it. Will only take him 5mins per month.

  3. Developers tend to develop most in bullish property markets.
    Economy gets corona and sh*ts the bed
    Developers stop developing.
    Conclusion: We are not in a property bull market.

  4. Sounds like they are losing the plot. I’m sure it’s because they think that the property market is about to start booming again…

    • Allied to the fact that house price inflation is seen as THE mainstay of the economy. This is 3rd world governance at its best.

  5. Chinese buyers and their proxies are still buying in Sydney and Melbourne.

    Money laundering in single transactions of multiples millions growing.

    The Australian government and RBA is well aware of and supporting this criminal activity.

    The flow on effects are that sellers of the properties get amazing prices and push up prices in other areas.. such as coastal and regional.. as is clearly evident.

    • happy valleyMEMBER

      No surprises there – money laundering proudly promoted by your governments. This is truly a sick and f.cked country.

    • You have mentioned this activity a few times Les, but I can’t recall you posting any evidence for it. Apologies if I have missed it, would you mind re-posting if that’s the case?

      • You can see it in the chart of house price change or charts of that nature against credit less refinance. You cannot see it directly but you can see where the cash transactions are by seeing where the price doesn’t follow the credit.

    • csfn, you will have an extremely difficult time trying to ascertain evidence of this because of the way the laws and regulations are set. Deliberately so. In order to hide it.

      It’s a complete no questions asked, no records kept of where funds originated from, zero government reporting at a federal level or any other level on RE transactions, zero background checks on foreign buyers, zero checks on companies transacting in residential RE.

      Just take a look on the publicly available RE listing websites of sold prices in certain favoured locations.

      Here’s some data that you won’t see the MSM having anything to do with:

      https://eliteagent.com/almost-20-of-new-victorian-homes-are-sold-to-overseas-buyers/

    • “Money laundering in single transactions of multiples millions growing.”
      Les, if you can tell me where and when I will make the great bookies robbery look like a Teddy bears picnic.

      • We live in an electronic world, old boy.

        When no one’s asking any questions of where funds come from, you can make SWIFT transfers to your legal firm’s Australian bank account from just about anywhere in the world and in any amount until your black heart is content. Austrac pulls it up? (Extremely unlikely), just say it’s for investment into the Australian economy or legal fees or a business loan.. plenty of valid reasons.

    • Until leaders and the voters move on from the ‘High House Prices Is Good’ shtick, this will continue.

  6. happy valleyMEMBER

    “Sack Deflation Phil.” And sack Wayne of APRA. Then, re-merge (wasn’t the original split, another of little Johnny Howard’s ideas?) and clean out the two. We need a tough dude (seemingly, someone like the head of the RBNZ) to do the job, with probably almost half the staff (most of the RBA ivory tower research staff could be put out to pasture) but using the enforcement powers they already have.

    • These organisations are arms of the State — officially there to protect citizens and do what’s right for the country as a whole.

      But the reality is somewhat different. The outcome of the Hayne RC should be ample evidence.

  7. Obviously some part of this internal reflection on messaging is what you would expect. But the degree of angling and apparent posturing from RBA on what the journos are reporting is where RBA seems to be lost in its own narrative. Suggests the RBA is not adjusting to what could be high prospects for severe change in the market.

  8. If the RBA is so sure of the property market, they should put interest rates back above the “emergency” setting of 3% for starts.

  9. “..This is absolutely no surprise. ..”

    Yep – it is exactly what we would expect when misallocation of capital on a massive scaled by our bloated big 4 banks has been going on for decades with the tacit approval of the RBA and APRA (and naturally the government).

    I appreciate that calling for fundamental reform of how we allocate capital in Australia makes me a “money crank” but at some point folks have to accept that shifting around the deck chairs is not a solution.

    By deck chairs I mean:

    1. Sacking RBA and APRA staff
    2. Macroprudential
    3. Demands that RBA and APRA deliver on their mandate
    4. Merging the RBA and APRA.
    5. Etc

    We are talking about a dead parrot, it is pushing up the daisies.

    The banks have done superb job of proving over 40 years that they can get the regulatory environment that is highly profitable for their shareholders and those who get preferential access to bank credit (maaaaates and the already asset endowed).

    We need to really open the model of how capital is allocated to its best and most productive use in Australia and the only way of doing that is taking away the privileges of our hopelessly brain dead and rent seeking banking sector.

    And the best way of doing that is by making the Central Bank balance the real core of the monetary system rather than simple a withered appendix that supports the business operations of the dopey banks. Any fund manager or non-bank investment manager or super fund or start up promoter who doesn’t want a fairer and more open and competitive model for capital allocation needs their head read. It would be a massive opportunity.

    And the best way of legitimising a much larger role for the Central Bank balance sheet is by making it democratic.

    The answer is MyRBA.

    https://theglass-pyramid.com/2020/08/20/investment-manager-special-edition-myrba-superior-for-productive-capital-allocation/

    • Display NameMEMBER

      Hard to disagree but what you are suggesting is a revolution. Only total collapse will make this an option in the near future and the banks are infinitely backstopped by the RBA.

      For most of us, our banking requirements are very simple. Retail banks should operate as cost plus utilities. After all they produce nothing. They should be simple boring businesses..

      • “..Hard to disagree but what you are suggesting is a revolution..”

        Not really by comparison with the scale of other changes we have made over the years.

        Allowing the public and non-banks to operate deposit accounts at the RBA is no big deal technically and when you start thinking about the idea that only banks should have that privilege, maintaining the status quo is the most bizarre option.

        Dealing with the implications of that change for the private banks is also not technically difficult.

        As for getting an alternate range of capital allocators up and running and competing for capital to allocate that is also not technically difficult as they already exist. They just have access to much less capital than they would have once MyRBA is introduced.

        https://theglass-pyramid.com/2020/08/19/myrba-ponzi-free-loans-and-investment/

        Plus – with COVID-19 sending huge economic shock waves through the economic status quo we need every bit of capital we can muster directed to the most productive purposes as fast as possible.

        We simply cannot afford to keep the current woefully unproductive capital allocation model stuffing things up any longer.

  10. Anything related to real estate with the words “dire” in it and I immediately interpret with Australian in-build psyche that house prices are back to doubling every 7 years instead of 4-ish……. ergo the world is ending

    • Jumping jack flash

      Interesting, and I suppose it is necessary for the house price growth rate to increase in line with the debt growth rate as time progresses to keep the debt growing faster than the interest now that we’re at the zero bound.

  11. In FY19 7,513 properties were approved by FIRB totalling $14.8B or $1.969M per average property, 42% was in Victoria highlighting a potential apartment trend. 6,200 were for new dwellings with a much smaller % on existing approvals.

    Here is the big call outs regarding foreign buyers;
    – Why do we not conduct AML/KYB analysis on purchases of such properties?
    – Why is realestate the only industry in which large sums of money movement (including cash) are not reviewed by AUSTRAC?
    – How many other properties were purchased by buying agents on foreign owners behalf without any oversight or analysis?
    – Why do real estate agents not have to be certified with an AML/CTF policy in the same way a financial services company does. i.e. be classed as a designated entity for reporting obligations?

    FIRB and AUSTRAC are government agencies with oversight by Foreign Affairs Minister and Treasurer. The fish rots from the head and on this basis they are both actively encouraging the laundering of foreign money through Australian real estate purchases.

    • The simple and correct answer is simple. LNP, the IPA and all their cronies and a good portion of their voters like it like this, ie corrupt crony capitalism, on par with any 3rd world economic structure.

  12. Jumping jack flash

    “Sack Deflation Phil”

    I personally don’t think there is a person alive who would or could do any better while maintaining the status quo.

    There will only be deflation if the banks are restricted from getting debt to the people fast enough.
    With an adequate debt growth rate the debt will grow the economy faster than the interest on the debt sucks money out and there will be inflation.

    And inflation is what we want. Inflation is great! Higher wages, more jobs, more expensive houses. Basically the RBA’s entire mandate.
    We haven’t had the parameters right since 2006. We are now very close to collapse as a result, but we haven’t collapsed yet. There’s still time to turn it around if the RBA just steps back and lets the banks rip.

    Add a bit of NIRP to keep Westpac Bill happy as well. It seems he’s a bit miffed that they took him to task on HEM.

    • It’s not the interest on the debt that sucks the money out, it is the repayment of principal. Interest payments get recycled through the banks as payments to deposit holders and shareholders.
      With lower rates, a greater proportion of repayment of P&I loans is principal, on average. This means that people can borrow more, but the economic drag from repayments occurs faster.

  13. Epping in NSW is a Chinese hot spot in more ways than one after last Friday though you’d hardly know it by the lack of coverage of what was nearly a mass murder. A channel 7 report was found – https://m.facebook.com/watch/?v=592455068105460&_rdr
    Onlookers attacked police and fire responders and some were arrested. Then let go. I thought it was a big offence to do so now. In any case, there is hardly a record of the whole incident anywhere when googled. The papers did not touch it not even the Daily Mail. Why?