While the Labour government and opposition have been busy condemning the big banks for slugging borrowers with a rate rise above the Reserve Bank’s official move in November, the RBA itself has come out in support of their actions.
However this is not the only surprise development from the central bank in recent times, with official documents and correspondence released by the RBA revealing their efforts to quash the growing debate on the link between the latest property boom and Australia’s continuing housing shortage.
According to a report published in The Australian, the Reserve Bank intervened in the heated political debate in a bid to prevent new government policy that would see the release of more residential land; fearing such a move would cause traffic gridlock, environmental issues and a US style housing slump.
Rejecting claims that Australia’s property market is an overvalued housing bubble waiting to burst, RBA officials have made obvious moves to downplay affordability issues and the dwelling undersupply that everyone in the industry is talking about.
In an email to the RBA’s head of financial stability Luci Ellis and head of economic analysis Anthony Richards, managing director of Rismark International Christopher Joye welcomed RBA governor Glenn Steven’s statements suggesting supply issues were contributing to rising prices. Mr Joye said he was delighted that the bank had “jump(ed) on the supply-side bandwagon.”
However in a related email to Mr Richards and several other colleagues, Ms Ellis denied there was any evidence that the property boom in the first half of the decade was caused by supply problems, stating it was more to do with pricing and availability of credit.
She said, “The people pointing to supply-side factors really believed at the time that if only these supply restrictions didn’t exist, prices would not have risen quickly. This is just rubbish, and we said so. Had we not ‘killed’ this debate (not that we did), some rather worse public policy outcomes would have occurred including bad environmental and traffic congestion outcomes, and more importantly, a housing supply overhang when the credit boom went away.”
While Mr Joye applauded Governor Stevens comments regarding supply constraints in the housing sector, he was critical of his claims that local housing is “expensive by international standards.” Ms Ellis agreed, suggesting drawing comparisons between our property market and the rest of the world was dangerous.
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