Captain Lowe greenlights house prices to the moon!

Via the good Captain today in Parliament:

The RBA does not – and should not – target housing prices. Instead our focus is on the lending that is used to purchase housing.

There are many moving parts here at present: record low interest rates; a shift in preferences towards houses and regional locations; large government incentives for first home buyers; the slowest population growth in a century; very high rates of house building; and a decline in apartment rents in Sydney and Melbourne.

Housing prices are now rising across most of the country. Even so, the national housing price index is only around the level reached 4 years ago.

If credit growth is the metric to watch, and it is, then house prices are going to run for years (though not very hot in Melbourne and Sydney before the millions of warm bodies return):

And when the tightening comes, it will be macroprudential not the cash rate.

Party on, dude!

David Llewellyn-Smith

Comments

  1. Defending the Indefensible does appear to be our RBA’s newest MO
    They can’t find Inflation because they conveniently edited it away just a few years ago
    We all saw what happened to the head of their modelling department when their own inhouse Martin model started “underperforming”. We were just so lucky that Uncle Phil knew exactly what actions were required without relying on some nerdy whole economy model, otherwise dog only knows where we would be.

    btw apologies in advance for using the word “house” in a manner that is guaranteed to confuse the majority of Aussies, it makes my rhetoric seem a bit like RBA policy.

  2. I must admit it is a very well rigged system. Get as many people in debt to their ears as possible, and then watch useful idiots at the RBA fulfilling their “to the benefit of most Australians” mission statement.

    There is also the “we don’t know how much debt is too much” rhetoric, as though perpetually having to cut interest rates because consumers are in debt and not spending isn’t a clue.

    • Jumping jack flash

      “… as though perpetually having to cut interest rates because consumers are in debt and not spending isn’t a clue”

      Cutting interest rates wasn’t to enable people to spend, cutting interest rates was to entice people to take on more debt because it was cheaper. The debt growth was clearly inadequate and something had to be done to keep it growing otherwise the deflation would become obvious, more obvious than the fact that hundreds of once-robust businesses were wiped out over a couple of years.

      After the debt is obtained and thrown up the great housing pyramid, THEN it is spent. the debt comes first, then the spending of it, and not by the people who have the debt unless their wages increase from the debt spending of others. Alas, wage theft got in the way of that. Wage theft ensured that even though debt was cheaper than ever, nobody could actually be eligible for it because there wasn’t enough wage inflation in the right places.

      Wage theft is a terrible thing. It is also unnecessary if the debt is churning fast enough.

    • Well the good thing about having people up to their ears in debt is employees are trapped and kept in their place. It’s a great tool for employers to exploit and bully their staff. Not so easy moving to a new job when you’ve got a million dollar mortgage to take care of.

      • Yes, Michael Hudson is very clear in his hatred of Alan Greenspan for intentionally getting people into large mortgages as a wage suppression mechanism.

        • Jumping jack flash

          It is my absolute belief that Greenspan’s actions were directly responsible for the mess we have now.

          Lowering interest rates when he did was economic suicide. Although it wasn’t just his fault. He was ordered to “fix” the economy while it naturally should have corrected due to dotcom. But there was a war on etc etc etc.

  3. We’re so lucky the high debt levels are concentrated in the households that can afford them……the same ones who all deferred their payments during Covid.

  4. Poochie the Rockin DogMEMBER

    Oh goody – stocks & housing to the moon, while wages never rise again. I think there is some wisdom in trying to FIRE, in 10 years what will my labour be worth? Nothing compared to housing & stocks

    • Considering everything they’ve had to do to keep the whole thing afloat the last 10 years, I will be shocked if this thing is still driving on 10 years from now. I mean, what do they have left to throw at it at this point? Sure, I probably wouldn’t be surprised if they could drag it out a few more years. But no strong growth China, interest rates at 0. Seems like the end of the line. Maybe what we are looking at in housing now is the final blow-off top. I guess we will see.

      • Jumping jack flash

        You’re correct.
        Thats why what happens now is so important.
        Trillions of “COVID stimulus” dollars shovelled into the economy to try one last time to kick off perpetual debt. Trillions of COVID stimulus leveraged into debt at 95% LVR.

        That equals a fair amount of debt wouldn’t you say?

        Hang on to your hats.

        Early release of super, a relatively tiny 30 billion dollars (and maybe JK too) triggered an unprecedented surge in debt.

        Imagine what a few trillion will do!
        The bankers are fed up with everything. Cutting interest rates for 20 years, and as you point out, especially the last 10 has infuriatingly achieved very little.

        The time has come for it to get real. We will get wage inflation again. We will get everything inflation.

  5. happy valleyMEMBER

    Captain Phil really couldn’t give a rat’s as long as he and his mates end up super rich? He’ll leave the mess for the plods at APRA to fix.

    Life is beautiful for this public servant but f.ck savers, depositors, unemployed and wage slaves?

  6. pfh007.comMEMBER

    “…And when the tightening comes, it will be macroprudential not the cash rate…”

    So many LOLs.

    As if APRA are going to work to undermine the stated objective of RBA interest rate policy.

    It just not going to happen in these salads days where prudent people simply adjust their shiraz and waygu intake.

    RBA wants an asset price bubble because that is what will drive demand for debt peddler product lines.

    And what the RBA wants the RBA gets.

    • Jumping jack flash

      Debt creates debt, debt repays debt, and debt secures debt.

      Won’t stop. Can’t stop. If it stops, or even slows, we get deflation. Nonproductive debt is deflationary at any interest rate greater than zero.

      In a debt economy, debt inflation is the same as economic growth.

    • 100 percent correct. We’re at the beginning of the biggest house price boom ever. It’s baked in. If you’re renting, you’ve made up your mind to be poor.

  7. Jumping jack flash

    “The RBA does not – and should not – target housing prices. Instead our focus is on the lending that is used to purchase housing.”

    Hahahaha!

    “We don’t target the effect, we focus on the cause.”
    Noice.

    • I know, the first thought I had when I read that was “OK, now I know for certain you are lying”.

    • working class hamMEMBER

      The smirk. You can actually see it, as the words leave his mouth. The self satisfaction achieved when they go unchallenged shovelling BS. Every boomer has it when they chortle about smashed avo, 18% rates in the 90’s and a targeted new tax break/supplement is announced by the the swarmy bootlickers that run this oppression factory.

    • The Traveling Wilbur

      “We don’t target the effect, we focus on the cause and stoke it. Hard.”
      Noice and surprising.

      An RBA Governor with a sense of humour. Who knew that was possible?