RBA macro-prudential discussion papers released under Freedom of Information act:
Paper from July 19 by Luci Ellis
- RBA says many tools to deal with property boom have problems
- Review of property policies should include tax system
- Rates buffer preferable to other tools
- More focus should be on serviceability than LVR
These are headlines crossing Bloomberg.
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Luci Ellis is the RBA Head of Financial Stability Department.
I haven’t seen these documents referred to. The RBA’s stated opposition to macro-prudential tools is not new news.
The part where Ellis says “Review of property policies should include tax system” is spot on, BUT the RBA has no jurisdiction in this area at all.
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The Australian Financial Review carried a story over the weekend: ‘Macro-prudential’ controls a risky option for the RBA (gated):
- The Reserve Bank of Australia, it seems, is warming to the idea of imposing much tougher borrowing requirements on home lenders
- In responding to questions at last week’s parliamentary testimony, RBA governor Glenn Stevens reaffirmed that the bank “had thought about this [macro-prudential controls]”, and had had “some preliminary discussions with the Australian Prudential Regulation Authority”.
- Stevens did suggest that one promising approach might be to insist banks apply a bigger interest rate buffer when assessing loans applications. Typically, banks assess home loan applicants by testing their ability to repay should mortgage rates rise by 2 percentage points above current rates. Banks might instead be required to apply a 3 or 4 percentage point buffer, for example.
