David Murray, head of the Government’s Financial System Inquiry, sounded the alarm on the rampant housing market yesterday.
After speaking at the Australian Centre for Financial Studies in Melbourne, Murray told journalists that Australia is not “immune” from economic trouble. “There only has to be a noticeable pick-up in unemployment and this can turn very, very difficult,” he said.
The upward pressure on unemployment is exactly why the RBA has an explicit easing bias. It doesn’t want unemployment to keep tracking higher. But the problem is that so far low rates and RBA easing seems to have only materially impacted on Australia’s housing market.
The Australian reports that Murray said:
“I think APRA (the Australian Prudential Regulation Authority) and the Reserve Bank have a problem here, and for the Reserve Bank it’s not without systemic considerations.”
That’s the message the RBA has given in the Governor’s statement after each of the last two board meetings. It’s clear the Australian economy needs more stimulus. But as Murray highlights, unless APRA and the RBA can rein in the more speculative elements of the housing market, Australia risks materially destabilising the economy longer term.
You can read The Australian’s story here.