Australian RBA thinks growing house prices are good

[deborah]

This article in Fairfax press www.canberratimes.com.au/business/the-economy/rba-says-house-price-jumps-good-for-economy-20141118-11ow8q.html is unbelievable!

The RBA said rising house prices were adding to household wealth at a time when wages were growing slowly, encouraging people to spend more money.

How many things are wrong with that? Inflation is growing more than wages...

[Kyle Schuant]

Since the mining boom can't last forever, and since our current agricultural production is turning half the country into a salt desert, and since we outsourced our entire manufacturing sector overseas, all we have left to grow is real estate.

It's either that or admit that endless growth is impossible... and if endless growth is impossible, then the only way the poor can get richer is by taking something from the rich. No rich person (and the RBA board are all rich) is going to suggest that is a good idea.

[Spiffsome]

Yeah, this is the country where the Prime Minister was asked point blank, "What about the young people being priced out of the market?" and answered (paraphrasing) "Well, the people who already own homes are doing well." In other words, if you don't already own real estate, bugger you. Not a real surprise coming from the conservatives. The flipside is that every time the Reserve Bank thinks about raising interest rates, the sitting government starts sweating because they know they'll be blamed for it. Real estate is insanely overpriced in this country, particularly in the capital cities.

[agent_clone]

To me the article makes little sense and appears to be a contradicrtion... I don't understand how rising house prices means that people have more money to spend on consuming stuff that the CPI tracks (they track the cost of building a new home but not the cost of purchasing established homes). I wonder if it was perhaps the article was taken out of context?

Rising house prices are an indication that some people have money to burn, although in this case it appears to be some investors are over speculating.

Personally I would be happy with house prices approximately stagnating allowing wages to catch up for the general population.  A serious crash would cause a number of issues to do with taxation income thanks to most of the states and territories having stamp duty (although the ACT is working toward correcting this).