From the Sydney Morning Herald over the weekend:
- One of Australia’s most pre-eminent economists, Professor Ross Garnaut, has warned the “whole economy” needs lower interest rates but that the Reserve Bank’s concern over the housing market is preventing this happening.
- Says he is concerned about house prices in Sydney and Melbourne because they are preventing the Reserve Bank from lowering interest rates to the level needed to bring down the exchange rate
- Australia’s economy was facing “very difficult circumstances,” he said, and a lower real exchange rate was needed to prevent the economy weakening further.
More at the article, it isn’t gated: Ross Garnaut urges Reserve Bank to end its housing market fixation and drop interest rates
More interestingly:
- said problems in Australia’s overheated housing market could be fixed by removing the “privileged position” of housing for capital adequacy purposes
- “It is ludicrous to be worried about lending risks in the housing sector on the one hand while at the same time requiring banks to put more capital aside when they are lending to BHP”
- “And there are several reasons to do something about negative gearing. There are budget reasons, and reasons to do with keeping within reach the old Australian dream of widespread home ownership.
