Agree Mal, this cut and paste from NZ would give a hint that Australia would be no different.
The other factor apart from high unemployment,high interest rates or possibly Both, is that wages will be capped like they have in some sectors of the NSW economy.
The federal government has a commitment to build massive infrastructure that is long over due for the long term of Australia's future prosperity, part of that reasoning is an increase in population and further deregulation of the work force to keep the cost down.
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RBNZ takes action to limit damage from housing bubble Written by admin on August 20, 2013 – 10:00 pm
New Zealand’s central bank appreciates the bigger the bubble, the bigger the bust. Today, it has taken action to curb potential damage from a bigger housing bust by restricting lending in the hope of cooling New Zealand’s overheated housing market.
Reserve Bank Governor Graeme Wheeler said “In the current situation, where escalating house prices are presenting a threat to financial stability but not yet to general inflation, macro-prudential policy offers the most appropriate response.”
From the 1st October 2013, mortgages with a LVR (loan-value-ratio) over 80 per cent must not account for any more than 10 per cent of new bank lending by dollar value. Currently lending to this segment is 30 per cent.
In explaining the reasoning for the new macro-prudential policy, the Mr Wheeler said:
Housing plays a critical role in our economy. It represents almost three quarters of household assets, and mortgage credit accounts for over half of banking system lending. Housing is a major source of value and of risk to the household sector and the banking system.
The Reserve Bank is concerned about the rate at which house prices are increasing and the potential risks this poses to the financial system and the broader economy. Rapidly increasing house prices increase the likelihood and the potential impact of a significant fall in house prices at some point in the future. This is particularly the case in a market that is already widely considered to be over-valued.
House prices are high by international standards when compared to household disposable income and rents. Household debt, at 145 percent of household income, is also high and, despite dipping during the recession, the percentage is rising again. Furthermore, the growth in house prices is occurring after only a small correction following the house price boom of 2003-2007 that saw New Zealand house prices increase more rapidly than in any other OECD country.
The Reserve Bank is not alone in expressing these concerns. Over the past several months the IMF, OECD, and the three major international rating agencies have pointed to the economic and financial stability risks associated with New Zealand’s inflated housing market.
The LVR restrictions are designed to help slow the rate of housing-related credit growth and house price inflation, thereby reducing the risk of a substantial downward correction in house prices that would damage the financial sector and the broader economy.
According to the RBA, Australian household debt to household disposable income sat at 148.3 per cent in the March 2013 quarter (re _: who crashed the economy)
