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A new report from the Australian Housing and Urban Research Institute (AHURI) sheds light on how the RBA and APRA are arguably conducting housing policy, lending further challenge to the fractured nature of Australia’s approach to its housing challenges.
The in-depth dossier takes aim at the country’s fragmented housing policy, which sees responsibility shared across multiple different agencies at different levels of government, with no single guiding force.
As Dr Chris Martin from UNSW Sydney, lead author of the research, explained: “This division makes it very difficult for us as a nation to grapple with the complex and interdependent nature of our housing system. It’s a major barrier to addressing the full scope of our housing policy challenges in a coherent way, and means we aren’t using all of the policy levers that we could be”.
In addition, the research highlighted how the current operational methods employed by the Reserve Bank of Australia and the Australian Prudential Regulation Authority mean that they are functioning as “largely unacknowledged” centres of housing policy.
“Through monetary policy and macroprudential regulation respectively, these institutions wield enormous influence on housing outcomes, but their influence is unguided by formal housing policy objectives,” the report noted.
With the RBA in particular, AHURI’s research uncovered how its approach to housing has changed even in recent history, yet without accountability for housing outcomes.
In the course of the research, AHURI spoke with an expert who provided background on the RBA’s operations, explaining how in 2017, the RBA stated that it did not target debt or house price ratios in its decisions, yet issued comments suggesting otherwise.
At the time, RBA governor Philip Lowe issued a statement explaining that although the board would like the economy to grow a bit more quickly, “if we were to try and achieve that through monetary policy it would encourage people to borrow more money and it probably would put more upward pressure on housing prices. And at the moment I don’t think either of those two things are really in the national interest”.
Post-pandemic, meanwhile, the RBA has been much more explicit in its decision not to target house prices, per the report.
The point of bringing this to light, it argued, “is not to adjudicate on the RBA’s monetary policy decisions, but rather to observe first, how monetary policy implicates housing, second, how housing market conditions have implications for monetary policy, and third, how the RBA’s understanding of these relationships has changed — without any formal articulation with housing policy, or accountability for housing outcomes”.
The report doesn’t make any explicit recommendations for reforms to the RBA, though the expert that provided background on the body’s function suggested three ways in which the RBA might be brought into reformist policy:
- Expand its mandate to expressly contemplate housing outcomes, such as affordability or price stability (as in the revised mandate of the Reserve Bank of New Zealand)
- Establish closer correspondence with the policy priorities of the government of the day, such as through remit letters (as issued annually by the UK Treasury to the Bank of England)
- Create term funding facilities for social housing
Similarly, APRA’s adjustments to the loan serviceability buffer was another such instance that the report highlighted of an independent regulator using “potent housing policy instruments that are not articulated with housing policy objectives”.
Ultimately, AHURI argues for the establishment of an overarching body to direct a national housing and homelessness strategy with a comprehensive mission to ensure everyone in Australia has adequate housing.
Such a strategy would ideally “open communication with the RBA and APRA about the intersection of housing and finance, and work towards formally incorporating our primary housing and homelessness mission in institutional mandates and other policy guidance”.
AHURI suggested that the forthcoming body Housing Australia — which will soon take over from the National Housing Finance and Investment Corporation — is well placed to be given these powers with the oversight of an independent board.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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