Slowing measures
The good people at ausbiz TV did a mini-section on whether macroprudential measures should be deployed to slow property markets.
They asked me for a contribution which you can see here from about the 15-minute mark (or by clicking on the image below):
Not too much to add to what I've mused on the subject previously really.
A few months ago folks were predicting house prices crashing by 30 to 50 per cent, and after a few weeks of rising prices we need to change lending standards?
If that's the case then there's a systemic problem which I just don't believe we have.
There is potentially a good case now that a crash has been averted for the government to phase out its various housing stimulus packages, but I can't really see how fine-tuning lending rules again will help much.
Most often frenzies level out naturally over time as more sellers meet increasingly circumspect buyers.
Credit growth over the year to January was +1.7 per cent - with inflation miles below target after five years of go-slow - so if that warrants a tightening I'm evidently blogging about a subject I know nothing about!
As I've said elsewhere:
'Unless there's clear evidence of pro-cyclical loosening macroprudential measures should be set-and-forget.
Applying macro-pru fine-tuning as an independent arm of stabilisation policy complicates both the role and accountability of the Reserve Bank (which is having enough trouble meeting its targets as it is).
Since we're all marginal borrowers at some point, over-zealous macro-pru chokes off the credit supply to the economy - small business owners also use equity from housing - and exacerbates wealth inequality by shutting out low income earning homebuyers at lower price points.'
Let's see.
