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."

Thursday, June 28, 2012

RBA's Guy Debelle: housing doomsayers are "experts in search of headline"

Some exceptionally objective and thoughtful remarks from the RBA's Dr Guy Debelle, who is 3iC at the central bank, and a graduate of MIT. Pretty humiliating, frankly, for those arguing in favour of 20-40% declines in house prices, or suggesting there is an "over-supply" of housing...

Questioner: Okay. Guy, to you, occasionally, economists – some well regarded, others in search of a headline – will say there’s going to be a housing collapse in Australia, like Ireland, like Spain, like the US. How do you respond to that?

Dr Guy Debelle: In a number of ways. I mean, we’ve put out a lot on this over the last few years, partly in response to those sort of comments. As Kathy mentioned earlier, I mean, there has been – we don’t see any sign of oversupply here, so – in the construction side – in the country as a whole. In South-east Queensland, probably yes. But elsewhere, basically, no. You know, the level of housing construction – the level is about where it was 10 years ago, and the population is – whatever – 15 per cent higher. So in that sense, there’s no overbuilding, as occurred certainly in Spain, for instance. People point to the level of debt that the Australian households carry, and it is relatively high compared to some of our peers. But we don’t see any problem with the households servicing that. This tends to be held by – you know, on average, by the upper end of the income distribution rather than – you know, it’s not a whole bunch of first home buyers out there gearing up a lot. The average loan to valuation ratio is not particularly high. And when we look at arrears, they’ve basically been going sideways at a pretty low level now for, you know, 18 months or so. So there was a bit of a tick-up early part of last year. But since around about the middle of last year, it has gone sideways, and that’s before any impact of most recent rate reductions.

Questioner: So you think it’s overdone – more economists in search of a headline than reality?

Dr Guy Debelle: Yes. I would say – yes, I would – I think that’s right. I mean, it’s not something that keeps me awake at night.

Questioner: Okay.

Dr Guy Debelle: Developments in other parts of the world, yes. The Australian housing market, no.