Powered by MOMENTUM MEDIA
subscribe to our newsletter
Economist flags stability concerns

Economist flags stability concerns

A senior economist has pointed to the Reserve Bank’s latest Financial Stability Review to highlight how difficult it is for the Australian economy to transition away from mining-led growth towards ‘something else’.

Alliance Bernstein senior economist Guy Bruten noted that the developing imbalances in commercial property, particularly in central business district office space, were given significant coverage in the RBA’s review, released last week.

“As in the residential sector, some of this is being driven by the reach for yield by investors, facilitated in part by more aggressive pricing and lending conditions from Chinese and Japanese lenders aiming to increase market share,” Mr Bruten said.

Advertisement
Advertisement

“And it is also occurring against a backdrop of deteriorating fundamentals. Demand has fallen away in Brisbane and Perth, as the resources boom has turned to bust. And there’s a significant amount of new supply to come on line in the next couple of years."

While these issues illustrate the difficulty of generating future economic growth without the mining sector, volatility in financial markets is picking up, increasing the likelihood of macroprudential policy measures, Mr Bruten said.

“The RBA, in cooperation with other regulators, is moving towards doing something more concrete on this front,” he said, “but what and how they do it, as well as the measures’ ultimate effectiveness, remain open questions. And in the meantime, investors are becoming increasingly anchored to the low-rate/low-volatility environment.”

This is the dilemma highlighted by the Bank for International Settlements (BIS) in its most recent quarterly review, Mr Bruten said.

“What path should central banks follow to resolve this dilemma?" he asked. "Well, as the old joke goes, ‘I wouldn’t start from here'."

Economist flags stability concerns
mortgagebusiness

 

Latest News

APRA’s proposal to loosen serviceability measures could reignite the credit boom, Moody’s has said, amid growing expectations that the m...

The median time on market for a residential dwelling has almost doubled, reflecting subdued demand for housing amid falling property prices,...

NAB and Westpac are among the 56 banks to endorse the United Nations’ Principles for Responsible Banking that will be launched in Septembe...

FROM THE WEB
podcast

LATEST PODCAST: How the mortgage sector will be impacted by the federal election

Do you think the banking royal commission recommendations could negatively impact competition in the mortgage market?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.