Agree that the only thing keeping our housing bubble inflated was ever increasing levels of credit growth. That growth in credit has been in decline since house prices peaked (national median house prices peaked back in April 2010) and is currently at the lowest since record began in 1976.
"The number and value of home loans taken out in December fell, with first home buyers accounting for less than 15 per cent of new lending and investors also reluctant to borrow."
http://au.finance.yahoo.com/news/housing-finance-slides-first-time-004711761.html
The RBA will be forced to follow the market down as they continue to cut rates during 2013 and beyond. But as Japan, Ireland, the US and other nations where a housing bubble has deflated, not even interest rates near 0% can stimulate credit growth if people remain reluctant to borrow to invest in a declining asset. This is the deflationary spiral that Japan has been stuck in for decades and the US, UK & Europe are being pulled into. Australia is now precariously perched on the edge of the abyss.
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