Australia is scrambling to find ways to support their housing market
The RBA is allowing banks to sell Mortgage backed securities by another name – covered bonds.
This rule change will lower rates in Australia by approximately 50bp – but at this point, the bubble is over. Valuations are simply too high, and everyone that wants a home already has one.
The Australia housing market bubble is popping – you can see it in the auction closing results. This guy is the Calculated Risk of Australia. I started following Calculated Risk back in 2005, and he was a lone voice in the wilderness documenting the day to day numbers associated with the U.S. bubble.
How bad will the fallout be for Australia? The currency will get hammered for a few weeks while the carry trade unwinds. After that, it depends on the strength of the global recovery. Australia might get lucky yet again – by being the only country that has a crash during the strong world recovery.