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The Reserve Bank’s future in implementing macroprudential tools to regulate the domestic housing economy has again come under discussion following Governor Glenn Stevens’ earlier prediction that it may be a ‘sensible’ move, despite his initial scepticism.
A member of the House of Representatives Standing Committee on Economics, nationals senator Matthew Canavan, told the Australian press earlier this week that the Reserve Bank has a lot of doubt about implementing such a stance, stating macroprudential tools have the potential for macro-sized errors.
“More than $200 billion a year is lent for housing, so even small misjudgements have the potential to do a great deal of harm,” Mr Canavan said.
It is understood the Reserve Bank’s deputy governor, Phillip Lowe, will front the economics committee special hearing this Thursday.
Liberal MP and chair of the committee, Kelly O’Dwyer, said the Reserve Bank has never ruled out using macroprudential tools and has been reasonably critical of their use in other international markets.
Speaking on the ABC’s Landline program, Ms O’Dwyer said what the RBA has suggested in the most recent Financial Stability Review is that it is going to work with the Australian Prudential Regulation Authority to ensure there are safe lending standards and that "seems entirely appropriate".
“Certainly, house prices in Australia are reasonably high and we have seen that impact particularly first home buyers trying to get into the housing market," she said.
“What we're currently looking at is the impact of foreign investment and how that applies to residential real estate. We have an existing framework at the moment that says, on the whole, foreign investment is really beneficial where we can add to dwelling stock, which means the stock that people can either purchase or rent.
“We've heard some anecdotal evidence that suggests there are people who are deliberately contravening the rules. The problem is, of course, that those people who are deliberately contravening the rules are simply not going to the Foreign Investment Review Board for approval. So it is quite a difficult and tricky area.”
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