Monday, 16 September 2013

RBA responds...with a damp squib

Readers may recall recent action taken by the Reserve Bank of New Zealand to counter rising property prices in New Zealand and prevent a housing price bubble which could throttle the economy (link here).  And not to be outdone, the central bank of Australia, the RBA has responded with...some strong words! (or as we call them, a damp squib!):

the RBA has told the big banks that a housing price boom is currently its "greatest fear" as prices are already high by most world standards (here).

Meanwhile growing calls for real action in the form of loan to value restrictions could lead to the RBA doing something concrete.

And it should not be forgotten the opposing forces in play - how likely is the RBA to raise interest rates to kill the property bubble if that pushes the economy into terminal decline and only exacerbates the inflows which fuel the speculative property bubble?  

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