Aussie Central Bank Admits, Property Prices “Have Gone Crazy”

With The Philly Fed admitting QE has been the driver of inequality in the USA and the Kiwis slashing rates unexpectedly, the fact that Reserve Bank of Australia Governor Glenn Stevens uttered the following is even more crucial. “I think it’s a social problem,” Stevens told the Economic Society of Australia, adding ominously, “I think some of what’s happening is crazy,” specifically pointing to Sydney property prices as an example. No matter where we look around the world, Central Bankers appear to be exercising their honesty glands about the impact of their policies. However Stevens can’t help himself at the end, noting “we remain open to the possibility of further policy easing.”

As Business Spectator reports, Sydney property prices have gone “crazy”, but record low interest rates aren’t entirely to blame, Reserve Bank boss Glenn Stevens says.

The RBA governor waded into the property debate on Wednesday, telling a business lunch that he finds Sydney’s soaring prices concerning.

However the RBA remains open to cutting rates further and always took into account what was happening in property markets across the country – not just Sydney – when deciding whether to adjust the cash rate, he said.

“What is happening in housing in Sydney I find acutely concerning for a host of reasons, many of which are not to do with monetary policy,” he told the Economic Society of Australia.

“I think it’s a social problem.

“I think some of what’s happening is crazy, but we have a national focus and so that just increases the complexity.”

In other words – we know it’s crazy what we are creating but we have no choice…

Treasury boss John Fraser last week said Sydney and wealthier parts of Melbourne were “unequivocally” in a housing bubble.

While Treasurer Joe Hockey has downplayed fears of a bubble, he has sparked a wave of controversy by telling frustrated first-time buyers that all they need is “a good job that pays good money” if they want to buy a home in Sydney.

In the meantime, the RBA remains open to cutting interest rates even further to help give the economy a boost.

“We remain open to the possibility of further policy easing, if that is, on balance, beneficial for sustainable growth,” Mr Stevens said.

“I think it’s quite some time before we even think about interest rates going up.”

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Or maybe not…