RBA in ‘uncharted territory’ on falling house prices says deputy governor Guy Debelle


Dr Debelle pointed specifically to tighter lending as a cause for the lower house prices and said it was not the cost of borrowing but the willingness to lend.


“Credit is still flowing but at a much slower rate and it’s something we are watching – but that is as much a function of banks willingness to lend and not so much the price.”


Credit among owner occupiers is still growing at about 5 per cent according to the latest figures while lending growth to investors is flat.


Westpac chief economist Bill Evans asked where Dr Debelle saw this house price cycle ending up given the last house price downturns all ended up with interest rate cuts.


“I don’t know Bill,” was the simple response.


Outside of house prices Dr Debelle said the weaker than expected consumption figure in the latest GDP numbers was something the central bank could only watch closely.


Consumption looks likely to upset the bank’s 3.5 per cent GDP growth forecast for 2018.


“Consumption was weaker on the expected, so we just have to see how it goes over the next few months and then we will assess accordingly,” he said.


HSBC chief economist Paul Bloxham, who attending the event, said he thought Dr Debelle’s cautious response to the weak consumption figure was a matter of not placing too much emphasis on any one part of overall economic picture.


“My reading is that they don’t want to put too much weight on one data point,” Mr Bloxham said.


Outside Australia, Dr Debelle, who spoke about the dangers of leverage during the financial crisis, said he was not concerned about the level of corporate debt in the United States.


“It does come back to how much [debt] is enough. It’s not obvious to me that [corporate debts] are excessive.”


He also said public debt was also not necessarily a problem.


“Public debt in Japan is currently at 240 per cent of GDP, but there has not been a crisis. We have seen other countries have debt crises at considerably lower levels of debt to GDP.”

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