Let’s Sort the Hullabaloo Created by the Property Bubble

According to a lot of people the Australian property market can be best described as a ‘bubble’. Can we blame the Reserve Bank of Australia for using low interest rates to generate an over-heated housing market? Well, let’s analyse the facts.
The three non-trade components of GDP are all down. So, our central bank has targeted the housing market in order to boost economic growth. By using low interest rates on housing prices, RBA is prompting economic activity. The strategy is actually working but as a consequence, houses in Australia have become 10 percent costlier as compared to last year.
If RBA dumps this policy, the risks are obvious – we might be able to lower the inflation rate but the value of the Australian dollar will rise and this might lead to growth of unemployment in the country. Now, do we really want that? So, let’s give RBA’s policy a chance.