Exuberant Sydney housing market disparate of real economy: Glenn Stevens

Reserve Bank Governor Glenn Stevens told a New York audience there is too much focus on the ‘exuberant’ Sydney property bubble. Addressing The American Australian Association luncheon, Stevens said: “Then there are dwelling prices, which, at a national level, have already risen considerably from their previous lows, at a time when income growth has been slowing. Popular commentary is, in my opinion, too focused on Sydney prices and pays too little attention to the more disparate trends among the other 80 per cent of Australia. That said, it is hard to escape the conclusion that Sydney prices – up by a third since 2012 – look rather exuberant.”

As we have reported over the past couple of months, the central bank has been unable to cut the official cash rate further after igniting the property bubble in February with a 25 basis point cut. Meanwhile the rest of the “real economy” suffers. Mr Stevens says “A balance has to be found.”

Last night’s comments could be seen as an indication the Reserve Bank will look beyond, or side-step, the Sydney property bubble when it sits in two weeks time to consider the official cash rate setting. But it could also be more jawboning, as the risks in doing so are too high to ignore. The central bank is worried about our record level of household debt, the highest in the Advanced world according to Barclays.

Stevens remarked last night, “The extent to which further increases in leverage should be encouraged is not easily answered, but nor can it be conveniently side-stepped. Even if we chose to ignore it, monetary policy’s ability to support demand by inducing households to bring forward spending that would otherwise be done in future might well turn out to be weaker than it used to be. For a start, households already did a lot of that in the past and, in any event, future income growth itself looks lower than it did a few years ago.”

And then there is the strong message for our dysfunctional government. The RBA can’t do all the heavy lifting via monetary policy:

“Across much of the world, too much weight is being put on monetary policy to try to achieve what it can’t: a durable and sustainable increase in growth, in an environment where private leverage is already rather high or even too high. Monetary policy alone won’t deliver that.”

Will the central bank cut next month? – or is the bank out of ammo and crying out to our government for some intervention?

» The World Economy and Australia – Address to The American Australian Association luncheon, hosted by Goldman Sachs – The RBA, 21st April 2015.


  1. I take this as there being no more cuts. I would like to see a 0.25 rise if just to see how the economy reacts.

  2. if the RBA wasnt fiddling with rates, the market would have corrected itself long ago. Rate fiddling creates an extra layer of speculation we don’t need. Add to this other brilliant failures like the FHOGs pushing up prices, unbridled overseas investment, and you can see this govt has no clue at all.

  3. I predict a quick turn then another rate cut, this speech keeps everyone guessing and is serving its purpose of keeping rates unpredictable.

  4. They are shielding themselves from what they know must happen sooner or later. These are not houses people are buying so they can live near where they work, these are foreign investors that can pull the plug far more easily once the slightest ill breeze comes along.

    There aren’t many more moves the government can pull, but by god they’ve done some extraordinary stuff thus far.

  5. As long as the industry controls the media and politics, who knows where it will go. In recent news, Property Council of Australia want to blow away stamp duty and give every homeowner a tax honeymoon period to adjust. In short, reduce the barrier of entry to artificially boost buyer numbers, many of whom won’t understand there will be future on-going costs of home ownership (new land tax). Kicking the can down the road a few more years. If they get their way, let the good times roll!!


  6. Anyone wonder why Western Sydney RE agents have recently started to call to check whether we are still looking and/or interested? Before, they never bothered even after leaving messages!

  7. Lets not forget central banks are the problem and not the solution. As we head for negative interest rates the bubbles in RE and stock markets will continue to inflate. Their models are so flawed that they cannot understand why unemployment keeps rising. Debasing our currency by lowering interest rates and money printing is equal to theft from the savers and transfers the wealth to the investor class. Eventually they destroy the economy.

  8. I don’t need a crystal ball to predict that if the Federal Government does not stop non resident foreign investors from buying established properties they will lose the next election. They are seen to be doing nothing about this issue or are too slow to react or even too afraid to stop the flow of foreign capital into Australia.

  9. 4. Privately owned foreign investors — real estate
    Foreign persons should notify the Government and get prior approval to acquire an interest in certain types of real estate.
    Regardless of value, foreign persons generally need to notify the Government and get prior approval to take an interest in residential real estate, vacant land or to buy shares or units in Australian urban land corporations or trusts.
    Foreign persons also need to notify for prior approval if they want to take an interest in developed commercial real estate that is valued at $55 million or more — unless the real estate is heritage listed, then a $5 million threshold applies. An exception for developed commercial real estate applies to prescribed investors, where a $1,094 million threshold applies instead.
    Foreign persons should also make an application if they have any doubt as to whether an investment is notifiable.
    The specific real estate rules are explained in further detail in the sections titled Rules for buying Commercial real estate and Rules for buying Residential real estate.

  10. As we get closer to the collapse of all stock,bond & derivative markets worrying about RE bubbles in Sydney is like re-arranging the deck chairs on the Titanic. It doesn’t matter as everything will go down together and it is too far gone to do anything about it. The central banks have painted themselves into a corner which they cannot get out of. So just get cashed up and wait for the bargains. Most great fortunes were made in depressions.


  11. Continuing the Titanic analogy Glenn Stevens is like the conductor getting the orchestra (RBA) to play louder while ignoring they have hit an iceberg.
    Lets face it a 2 year old with a pocket calculator could show the treasurer that you cannot run bigger and bigger deficits with a decreasing income base and not sink the economy.

  12. I agree with Morpheus and Max D. Leverage. Logic would dictate that the economy would sink. However while the printing presses are running hot printing worthless $’s along with most other central banks printing their currencies with nothing to back them up. The fiasco will continue until they dream up another scheme to keep the world economies afloat.

  13. Average_bloke-Interesting article. I would not give too much credibility to the statements made in the article considering the source. Politicians are well known for making sound and logical policy when in opposition. But once in power, their policy ‘backflips’ would make even an acrobat jealous. Instead we should look at the meaning behind the article. It is unbelievable the level of hypocrisy and how low this party has stooped to. All members of the Labor Party(what? relation does the name have anything to do with labourers is also a mystery) were born into a life of priviledge, raised in the most affluent suburbs, educated in the best schools, always had plenty of money in their wallets, expensive cars and million dollar property portfolios and especially they do not have a clue on how to survive on a labourer’s minimum wage, of who they say, represent. What is equally mysterious is these same minimum wage earners know this and continue to vote for them and at the same time complain about the rich. We live in a world of hypocrisy and paradox’s and we can conclude that when the majority of people vote and support a cause it does not make them right.

  14. @ Ross:

    Kind of agree, but not on the fact that paper money has nothing behind it. It’s a sneaky, sneaky system.

    All fiat currency is backed by the labour of workers, the trouble is, it’s labour from the future…. The more they print, the more they steal from the future. The system breaks usually in one of two ways:

    1: They steal so much from the future that the system fails under it’s own weight. eg spain… with unemployment approaching 50%, why would you work when the government is using your taxes purely on interest payments. ie the country is literally going backwards.

    2: The public wake up and cause a revolt or force the system to break. eg Iceland, when they seen what the post GFC world looked like, they decided to NOT honour their government debts…. They are a better country for it now.

    If you really want to understand HOW our future labour is stolen only to be used in printed currency for today you must watch The Greatest Scam In History: https://www.youtube.com/watch?v=iFDe5kUUyT0

    If you’re not aware of how finance works, you WILL need to watch it several times: It is quite long, but the reward of knowing how things are going to happen is quite relaxing.

    It’s no accident that the central banks are privately owned.
    It’s no accident that the same central banks are stealing YOUR labour ever minute of everyday.
    It’s no accident that the banks and governments are ramming increasing levels of debt down our throats, whether on a personal level or governmental level.
    It’s no accident that the interest repayments the central banks are receiving is used to buy real, hard assets.

    What is happening, is for the cost of a printing press, the central banks are getting ENORMOUS interest payments which they are then using to PURCHASE real assets….

    Even central banks don’t believe in fiat currency…they swap it for precious metals, commercial land, profitable companies, housing (question of the day: Who owns the most homes in the USA by number? The fed courtesy of QE, QE2 and QE3…with QE4, all but started)……

    You’re labour is being stolen by the rich to purchase real assets…. It’s a beautiful system, that almost no one believes is real. But by the time the public at large will know about it, it will be far too late: As I said, the fed is already the largest home owner in the USA…. It doesn’t pay any tax, it’s not even audited for crying out loud…..

    “The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered. ”

    ― Thomas Jefferson http://www.goodreads.com/quotes/171666-the-central-bank-is-an-institution-of-the-most-deadly

    The only comfort is to know, that since 2007 the FED has NEEDED to QUADRUPLE it’s currency base to remain afloat. No one can say how long the system will continue to hold together, but quadrupling your currency base with no improvement in the real economy, but massive bond, stock and housing bubbles, are red flags that are ringing alarm bells in every government building throughout the world…. The panic in Canberra is obvious. The panic in the USA is obvious…. But the lemmings continue to borrow.

  15. @Matty-Thomas Jefferson is very right-However he did nothing to ban them, just like no one did nothing to stop people from smoking, excessive alcohol drinking, casinos, local councils, allowing all forms of governments to rule over the people instead from them etc. etc. etc.-All prove the point people are naïve, gullible and easily swayed because they want to and most not all are to blame and they fully deserve the consequences of their actions.

  16. Yes, at the end of the day, all governments (in whatever form, be that tyrannical or righteous) are a direct reflection of the hearts and will of the people they allege to represent. When the people are righteous they get genuine public servants as a reflection of that, but when the people lean toward greed and corruption and getting ahead at the expense of their neighbour’s etc then you end up with rulers rather than genuine public servants (which is really what we have today).

    Nevertheless, our greatest problem will NOT be the collapse of the current fiat funny money debt system that curses even the unborn (borrowing from the future to pay for cafe lattes and pokies today), that is a given based upon history (this system has been used several times before and it collapsed violently every time).

    Our greatest problem will be how to quickly re-organize our communities in such a way that people in genuine need can still be taken care of in a situation whereby there are suddenly no pensions or welfare payments.

    You may all find it difficult to believe just now that one day, there will suddenly be no pensions or welfare benefits as a result of the monetary system collapse (just before that time there will be massive inflation anyway whereby the pensions etc will NOT be enough to survive on anyway), but these systems have always ended the same way in the past.

    Now is probably a good time to consider how you might regroup with others in your community (the larger the better) and how you can work together when that unfortunate scenario finally arrives. It is far better to stick and work together rather than taking an “individual” survivalist approach too. The alternative/replacement system should be able to take over almost immediately (once everyone stops crying, whinging, and cursing in utter disbelief etc)

  17. @ Matty,

    Yep you have it.

    Our foreign owned central bank has nearly doubled the Broad Money Supply from around $1tn to $1.7tn since 2008. Yes nearly double. All unbacked off a printing press / at the stroke of a key.


    Thomas Jefferson was talking about this problem looming. His last sentences talks of real money. True money cannot be printed. Whereas Currency can and is being printed into oblivion.

    Matty you missed Thomas Jefferson’s last sentences where he is talking about True Unprintable money, precious metal…as follows.

    “I believe that banking institutions are more dangerous to our liberties than standing armies… The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

    @ THEO

    Every other president that tried to put the power back into the people’s hands was assassinated.


  18. The government has a policy to save its ass from collapse. It’s a super policy. If ya know what I mean. I’m starting to wonder if it ever really was a retirement fund at all… I think its ultimate purpose is emergency fund. If you are going to tell me that it can’t be because so many people have benefitted from it… Guess what. The best scams and illusions are real, all the way to the end.

  19. @ Jj

    It’s not like it hasn’t happened before:

    Where is the cash from the national welfare fund? It disappeared into general revenue….Just like YOUR super might….

    Here’s a choice Australia “Proceed with your own super fund, which doesn’t appear to be working out that well for the working class, or allow the government to swallow it, and they will provide you a pension”….. Many Australian’s will pick the wrong answer.

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