Federal Treasurer Joe Hockey has again dismissed the idea that a property bubble is forming in Australia, saying that rising prices were just a reaction to lack of supply.


Echoing the thoughts of many private sector economists and bankers in the country, Mr Hockey said the idea that households and investors were taking on too much debt to buy houses was wrong. “I’m not so sure it’s credit fuelled,” he said during a seminar in Sydney. “There’s a lot of cash going into property now.”


He said the recent surge in new dwelling construction – much of it the result of foreign investment – in Sydney, Melbourne and Brisbane might go some way to addressing housing shortages in the country. “Australia fundamentally doesn’t produce enough houses to meet demand,” the Treasurer said.


“It is just an infinite mantra for international commentators, for analysts based overseas to say ‘well, you know, there’s a bit of a housing bubble emerging in Australia’. “That is rather a lazy analysis, because fundamentally we don’t have enough supply to meet demand. “That doesn’t suggest there’s a bubble; there might be a price increase of some substance, but you’d expect the market to react and produce some more housing.”


The Treasurer’s comments come two days after the Basel-based Bank for International Settlements warned that Australia’s housing market looked overheated on a series of metric. Mr Hockey said a lower Australian dollar might encourage more investment in new housing, although he declined to speculate on whether or not current weakness in the local currency would last long enough to speed up Australia’s economic transition.


He said currency speculation was a “mug’s game”. However, Mr Hockey agreed with Reserve Bank of Australia governor Glenn Stevens that animal spirits were key to the re-engineering of the Australian economy, along with low interest rates, infrastructure investment and other government programs. “Yields are, overall, quite low around the world,” he said. “So if people are not having a go when yields are at very low levels, then when do you have a go?”


“Putting your money in the bank is not going to deliver you necessarily long-term benefit. “Now’s the time to have a go – we’ve got a trajectory that involves improving economic growth over the medium term.”


From SMH