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Australia is scrambling to find ways to support their housing market

December 15, 2010 Comments off

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.

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