Property Bubble Fiction

The RBA say it is looking to APRAs work, new announcements on limiting bank lending to investors, to cool the property bubble. APRA says it is doing the job and takes into account the RBA’s outlook on the economy and interest rates.

This subject gets covered a lot at Property Club, and so it should. How hopeless are APRA and the RBA? OK, to be fair the new Governor has not really had much of a chance to prove himself as yet, but as Deputy Governor he certainly failed to impress with his bizarrely consistent two or more years after the fact analysis of key events.

APRA is another career for the boy's type organisation. An awful lot of procedural and compliance nonsense, just it would seem, to make life and enterprise difficult for the rest of the country. I wrote a short fiction story a few years ago, set in 2050, where China appoints our Prime Minister in return for funding our schools and hospitals. So lost have we become in the bureaucracies overseeing the bureaucracies etc. Much of RBA and APRA time now seems to be spent assessing the other, and its impact on markets. The rest of their time would seem to be split between analysing analysis techniques, which one worked best in the past, and, reading and believing in the various fear mongering newsletters about property bubbles out there.

It seems “property bubble” has become a religion. You know how it is with religions, they are true and anyone who questions them is a “disbeliever”, a fanatic, or worse. (Which is correct regarding my own religion of course.)

This is the whirlpool of stupidity the RBA and APRA now find themselves well spun. They speak of a property bubble as if it were a given fact. All their analysis and regulatory and policy decisions are emanating from this fervently held point of view. Which is quite amazing, because it is not a fundamental fact. Not at all. So what is to happen of the Australian home owner and property investor when the economic institutions of the land, have their basic fundamental facts, wrong?

It is an awesomely worrisome state of affairs.

Fortunately for the wise property investors already with a portfolio and building one, it means the upside potential for existing holdings just got a whole lot better. Less supply means higher prices, especially in an environment of burgeoning demand as we have discussed so many times before. Both domestic growth and immigration, as well as strong domestic and foreign investment demand. Yet our hallowed ivory tower emperors with not a shred of clothing, insist on making it harder for Australians to invest in the growth and supply of homes for other Australians. An investment which would maintain affordability for everyone. Well as it would be in a perfectly normal economic environment.

That we claim to embrace capitalism as part and parcel of our democracy and yet seem to do everything we possibly can to take away free market functioning, never ceases to amaze me.

A greater proportion of the population than ever before, and it continues to grow, spend all their time in developing, enforcing, or complying with regulation. To pay for this loss of national productivity, our governments seek to tax us more and more. While all the while saying they are for and announcing tax cuts, that rarely eventuate.

This is not a healthy path. It is a downhill path for society, while an uphill path for property prices. APRA, in particular, is creating a lose-lose-end-game. I suppose we should give them points for creativity. Then again, maybe not.

As always, the economic and property outlook for Australia remains strong because of the prosperous global era in which we live, the great on-going success of China, and despite our own particularly localised political and regularity stupidity.

Post note: Rob Lowe the new Governor of the RBA, promoted from within without any real scrutiny, as usual, looks to have aged 10 years in the past twelve months. Perhaps he has discovered there is a real economy out there, with real people, and it isn’t just plotted points on charts the way he is used to?

Clifford Bennett