With record levels of household debt stagnating house prices are bad news for the stability of our financial sector
The hoped-for soft landing of the Australian housing market took another hit with the release of the latest housing finance data showing the biggest annual fall in housing finance commitments for nearly eight years. Both the Reserve Bank and the International Monetary Fund have recently pointed to concerns about the level of household debt as we reach a decade since the global financial crisis.
Ten years ago in October 2008, the Reserve Bank hit the panic button. It cut the cash rate by 100 basis points, just a month after it had lowered it by 25 basis points. It wasn’t finished. The following month it cut another 75 basis points, and then in December yet another 100 basis points were dropped, only to be repeated in February 2009, before the final 25 basis point cut occurred in April.
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