Australian housing 'flashing red'

Australian housing 'flashing red'
Australian housing 'flashing red'

Interest rate hikes aimed at curbing Australia's property boom and surging household debt would likely be "very costly" to the broader economy, a leading US central banker has warned.

John Williams, president of the Federal Reserve Bank of San Francisco, says Australian house prices are "flashing red".

But he cautioned against trying to fix the problem by hiking rates.

He said they would have "very unfavourable trade-offs" - and especially high costs in terms of unemployment and inflation".

Dr Williams suggested the lack of a housing downturn, or a recession since 1991, may be making many Australians too complacent about the risks that have built up.

"A lot of our attitudes towards investment, economic phenomena, like inflation and things like that really are shaped by our lifetimes.

"If people think there's no risk, they'll take a lot of risk," he told The Australian Financial Review

"If you raise interest rates to try to maybe slow the house price build-up or debt build-up, that harms the economy, makes it harder to achieve your central bank goals of whatever your inflation target is."

Tags: 
Interest Rates Housing Prices

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