Key, the RBA is in a very tight position.It generally takes from six months for an interest rate movement to have the targeted effect.
With unemployment growing, wages falling and inflation most likely to decrease the need for stimulus is obvious....except for the effect rate cuts will have on some housing areas.
RBA was talking a little while back about doing the only thing it can to curb bank lending, that is to place statutory lending guidelines eg % deposits etc in place. If things become desperate the bank just might bring in draconian restrictions targeted for those areas that have inflated property values.
At the moment if you have a house and a job you're royalty at any bank who will lend for virtually any purpose using standard security. So some young people who bought into areas that have increased in value just via pure luck will be tempted to borrow further when in fact they should be attacking their loan balance every payday.
Should the RBA exert pressure on the banks' lending policies there could be an adverse reaction in suburban areas outlined above.
The banks are profit driven and will lend until circumstances slow them down.
