ha haWe finally get to figure out whether Phil Lowe is half smart and worth the $1.02 million a year he pays himself (the Reserve Bank of Australia’s board is a rubber stamp).
It would be incredibly dumb to unnecessarily cut the cash rate – and possibly influence the election result – when this will get capitalised straight back into house prices and stop a desperately-needed correction in Australia’s overvalued bricks and mortar.
To be clear, it is likely Lowe fails this intelligence test in May, at least judging from the probabilities in market prices.
When the chief risk officer of one of our biggest banks tells me he would like house prices to fall another 10 per cent, you get a sense of just how important it is for the RBA to allow this market to fully clear and unwind the enormous bubble Martin Place blew between 2012 and 2017.
Most bank CEOs I have spoken to oppose a rate cut even though it would immediately bolster their loan growth, reduce arrears and improve their profitability, notwithstanding the hit to net interest margins from the reduced earnings on transaction accounts that pay no interest.
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Oh look, the big end of town and banks found their common voice, worried about the election gravy train and rate cuts (yes, plural as in 2).
