Australia’s official cash rate has remained at record emergency lows for twelve months now, a setting not seen in over five decades. But signs are now emerging a hike in interest rates is imminent to quell the dangerous and unsustainable Sydney property bubble.
Former RBA board member Warwick McKibbin, now a member of the CAMA RBA Shadow Board designed to mimic the actual RBA board spoke to the ABC’s Peter Ryan.
McKibbin believes the RBA has cut the official interest rate too low and cheap money is creating a dangerous housing bubble in Sydney. “It is pretty clear that as interest rates rise back to what is considered normal, that there will be some adjustment in the housing market” remarked McKibbin.
Inflation is now at 3 per cent, the top of the RBA’s comfort zone. He believes the RBA will have to start increasing interest rates within the next 6 months, to more normal levels.
The Bank for International Settlements (BIS) warned in its 84th Annual Report that record low interest rates were likely to fuel a new global financial crisis, as low interest rates fuelled rampant asset price speculation.
» RBA shadow board warns of housing bubble risks – ABC AM, 4th August 2014.