RBA's Glenn Stevens says taming the housing markets has worked

APRA’s attempts to tame the excesses of the housing market had been more successful than the RBA boss Glenn Stevens expected, but he says attempting to contain the growth in credit with regulatory tools over the long term, while low interest rates remained, would eventually fail.

“That’s really what we were trying to do in this country for quite a long time up until financial deregulation occurred,” the outgoing RBA governor said in an exclusive interview with The Australian and The Wall Street Journal.

“If we sought to contain credit growth for a lengthy period with regulatory tools, we probably would end up relearning those lessons.”

He advised that the efforts by the Australian Prudential Regulation Authority and Australian Securities & Investments Commission to rein in the growth of housing credit were working.

“I would say that the things that have been done have probably been more effective than I had hoped at the margin, so that’s good,” Mr Stevens said.

But he said the most effective step was APRA’s insistence that institutions raise their lending standards, rather than the more publicised 10 per cent cap on growth in investor loan portfolios.