Something remarkable has happened recently in the Australian banking and regulatory landscape. The RBA governor and his team seem to have had a “road to Damascus” moment on both the impact of investors on housing and the use of macro-prudential limits on some types of lending.
Of course it is never as simple as it appears with RBA head of financial stability and world renowned authority on all things housing, Luci Ellis, highlighting back in May the distorting impact of investors on housing.
But it’s news to the Senate Banking Committee chair Sam Dastyari, who told the AFR he is “concerned about the unanticipated consequences of the Reserve Banks’s view-change on the sustainability of the housing boom and whether it needed to interfere with bank lending”.
It would be trite to highlight that the interference in the operation of the central bank and its regulatory colleague APRA by a bunch of politicians – especially from New South Wales where all the action is distorting the markets and driving the RBA’s fears – might also have consequences that are not positive for either housing or the market.
But Senate economics committee colleague and former economist at the productivity commission, Senator Mathew Canavan, joined Dastyari in voicing his concern to the AFR saying:
“I don’t think a clear case has been made yet for macro-prudential action in Australia and the Reserve Bank seem to have had more self-doubt on this issue than Saint Augustine.”
What is the saying about changing one’s mind when the facts change?
With more than 40% of all loans now being for investment housing, and with those investors continuing to largely buy established dwellings rather than adding to the stock, Australian housing is faced with a burst of buying fueled by the negative gearing tax shelter.
Any chance that the Senate Economics Committee could take a fresh look at the impact of negative gearing on housing appear unlikely, however, with Dastyari wedded to the near 30-year-old mantra that an end to negative gearing will hurt renters.
He said the public “needs confidence these tools won’t have unintended consequences: when Labor axed negative gearing in 1985 there was an immediate unintended impact on rental prices”.
It’s 2014, Senator Dastyari, not 1985 – time for a rethink.
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