Monday, November 8, 2010
There were a bunch of stories out yesterday and this morning about how rate rises have sucker-punched the housing market for Sydney and Melbourne I, II. See also Delusional Economics for some good graphs on inventory and a scary take.
After one result only, it's a little early to tell how much damage is done. But there are growing reasons for concern.
First, RateGate has arrived at what was already a moment of softening housing activity following the FHBG ramp. So we are developing some momentum to the downside.
This blogger will observe that in stringing out their own responses to the CBA rate jump, the other three big banks are stringing out the damage to sentiment.
There is also something of an unknown in how the punters will react to Joe Hockey's ongoing campaign. The Shadow Treasurer is on an outrageous political winner, but in keeping the bank issue on the front burner, there is going to be ongoing uncertainty about where exactly interest rates are headed. That's another reason to reconsider an investment.
Both the government and the bankers seem pretty close to panic, which is feeding into generalised regime risk.
And the bubble meme in the press just won't die.
Finally, despite the fact that the debate remains obsessed with interest rates, there is a growing sense that the Invisopower! preventing discussion of the real problem of offshore bank funding is also waning.
The failure of the Rudd and Gillard governments to use a rational and transparent policy framework like a Wallis Inquiry to address flaws in the Australian financial system exposed by the GFC is coming home to roost.