The RBNZ has already done so:
New Zealand’s central bank on Wednesday said it would re-impose mortgage curbs next year and work with the government on fixing a housing crisis, reinforcing views that deeper cuts to interest rates into negative territory are now less likely.
The government on Tuesday sent a letter to the Reserve Bank of New Zealand (RBNZ) asking it to consider factoring property prices as part of its policy remit amid broad concerns about housing affordability.
…His comments came as the RBNZ announced the planned re-imposition of mortgage lending curbs, called loan-to-value ratio (LVR) restrictions, by March next year.
The obtuse AFR thinks the RBA will move next:
A 7 per cent rise in house prices next year could be enough to prevent further quantitative easing from the Reserve Bank, some economists have suggested, but others say record state debt and a high Australian dollar mean the central bank will likely expand the program.
…Ben Udy from Capital Economics said a 7 per cent rise in house prices would be enough for the RBA to reconsider its quantitative easing program.
…Others disagree. George Tharenou from UBS said despite better employment growth the jobless rate was still high and that meant the RBA’s inflation target was still a long way off.
“This combined with the RBA’s focus on keeping government borrowing costs low, amid very large budget deficits, we expect the RBA to flag at its February 2021 meeting that it will likely expand QE by an additional $100 billion,” Mr Tharenou said.
7%? Make that 20% before anybody even draws breath. As the RBA recently said, there is no financial stability risk. As well, the question will not be the RBA’s, it will be APRA’s. Just as it has been in NZ, macroprudential tools will tighten first amid the global currency war. More from Westpac:
― The subsequent Q&A off ered additional insights into the Governor’s thinking around housing market risks. He viewed the prospect of ‘excessive froth’ emerging as unlikely, emphasising population dynamics and likely continued caution around borrowing. However, he also noted that if prices and borrowing were to rise too quickly then macro prudential instruments could be eff ective in slowing the rise, citing the experience in 2015 and 2017-18.
― This could well be the situation confronting the Bank in a year or two. Our forecasts have the unemployment rate at 6.3% by the end of 2022, well above anything that might be considered full employment, with other utilisation and wages growth measures also still\ showing a large amount of slack. Policy rates globally are expected to still be stuck at their lower bounds. Even with growth above trend, that would seem to completely rule out an interest rate rise.
― However, at the same time, Australian dwelling prices are expected to have risen 14% over two years. If market optimism, investor activity and borrowing are all starting to take off , a macro prudential response will clearly be the preferred tool to manage the situation.
I see no danger of this happening in 2021. Probably little chance in 2022, either, as iron ore corrects and the China decoupling intensifies.
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