The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Wednesday, July 4, 2012

What house price index does the RBA use to brief its board members?

After each monthly board meeting, the RBA publishes its official "chart pack", which is a detailed 30 page presentation on the Australian economy that it uses to brief members.

The RBA's chart pack includes one chart on Australian house prices, covering the individual capital cities, a national weighted-average of the capital cities, and a rest of state index.

For many years the RBA used to only use the ABS house price data in this chart. Some time ago the RBA switched to RP Data-Rismark. RP Data-Rismark's new daily house price index is the only house price data used by the RBA in chart pack. Specifically, the RBA takes the daily index number for the end of each month, and then seasonally-adjusts these data over time. (The RBA was also consulted as part of the daily index development process.)

The chart below was published by the RBA today. It illustrates RP Data-Rismark's daily index data through to the end of May (ie, it does not include the latest June data). Further to my post below on different house price measures, I would note that the RBA's team of 100 plus economists can use whatever house price data that they deem provides the best possible insights into the market.

In the quarterly Statement on Monetary Policy they choose to report three different indices--from RP Data-Rismark, APM and the ABS--although the charts in the SMP, and the RBA's official conclusions in the text, all normally reference the RP Data-Rismark findings.

For the avoidance of doubt, the RBA does not rely exclusively on any one index provider. The RBA inspects and analyses at least three (ie, RP Data-Rismark, APM and the ABS). But given the significant differences in the technical methods, it has developed preferences over time.