Oh, the panic is on now! Chris Joye from Cooolabah with the note:
Even 100 basis points of RBA cash rate increases would have profound consequences for asset pricing. Combined with some out-of-cycle rises from banks courtesy of normalising funding costs, this would probably force house prices, for example, to correct about 15 to 25 per cent. In fact, the RBA’s own house price forecasting model, which we have replicated and refined, implies a larger drawdown of about 33 per cent.
The normalisation of Australian inflation, and the Reserve Bank of Australia’s cash rate with it, is a game changer for everything: equities; bonds; house prices; and portfolio construction. Everyone needs to go back to first principles and re-evaluate their decisioning juxtaposed against a world in which short and long-term interest rates could be a lot higher.
