Is the RBA too focused on housing investor activity in Sydney and Melbourne

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Livewire Markets

Is the RBA too focused on housing investor activity in Sydney and Melbourne? No - Excessive house prices are a significant risk to the economy. Affordability is a problem for the next generation and excessive leverage by young families exposes them and therefore lenders to interest rate and pricing risk. The real underlying leverage of 30-45 year old families with a few children is misrepresented by national household debt numbers and household interest payments. Australia has both excessive household debt and high household worth - they just reside in different generations. Structurally Australian Banks represent an excessive part of the Australian Economy that was hidden by the resources capital boom. However, the residential price boom and decline in resources has swelled the Australian economic and market exposures to major Australian banks. Australian regulators have to absolutely monitor the real leverage in the financial system and that clearly includes the Banks residential lending exposures.


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