It’s probably not very difficult for those few central bankers who happen to work in natural resource rich western nations to slam policy makers in the U.S. and Europe for their recent bungling of debt troubles, this MarketWatch report providing the latest comments by Reserve Bank of Australia Governor Glenn Stevens.
Stevens said “in both the U.S. and European cases, the process of allowing things to go right to the brink of a very disruptive event before an agreement is reached on the way forward has been a source of great uncertainty and anxiety around the world … [and] that anxiety has extended to Australia.”
It’s hard to sympathize with Stevens since, without the consumption and debt excesses in the U.S, China would not require near the amount of raw materials they currently import from Australia where, lately, there is renewed concern that the long-delayed bursting of a housing bubble might come sooner rather than later, the first inkling of fear at the central bank apparent with comments like these:
Turning to the Australian economy, Stevens said that Australians should develop some “longer-term perspective” over household income, spending and saving trends.
He said that he wouldn’t disagree with the common perception that consumers are cautious, with consumption growth flat for three years, but suggested that there could be some misconceptions about what’s driving reluctance to spend.
One explanation for this shift is that real asset prices, such as prices for houses, aren’t rising as quickly as they did before 2007, he said.
“They look very much like they are on a much flatter trend,” Stevens said. “If people had been banking on a continuation of the earlier trend, they would be feeling rather disappointed now.”
As far as housing booms go, talk of a “perpetually high plateau” is about as close as you come to “a kiss of death”, especially if price to income ratios are at astronomical levels, as they currently are in some Australian cities.