Economists grapple with 'macropru'
Economists spent a large chunk of this week wondering whether the RBA was seriously considering using rules and regulations rather than interest rates to pour cold water on the property market.
Those rules and regulations, designed to prevent the failure of individual banks and other institutions, are usually lumped together under the banner of prudential regulations.
But when used for a wider purpose, like cooling the housing market, the banner is changed to read macroprudential regulation.
In its Financial Stability Review (FSR) on Wednesday, the RBA "did some serious jawboning by hinting that it might utilise the macro prudential tools", Commonwealth Bank senior economist John Peters said in a report.
But he doubts that "macropru", as it's called for short, is the right way to go.
"The possible macroprudential tools may only have a limited impact on the older, wealthier, highly paid individuals who account for most investor activity," Mr Peters said.
"And if the main risks are 'macro' rather than 'prudential', then those risks fall within the RBA's domain to manage interest rates."
Royal Bank of Canada economist Su-Lin Ong said the RBA had a "long held opposition to macroprudential tools" but had now "appeared to open the door a little wider".
"But, they are likely to be carefully targeted (at investors) and will probably not be prescriptive in nature with hard targets or ratios," she said.
Instead, the RBA will more likely use "a soft form of macro prudential tools", she said.
JP Morgan's Ben Jarman described this approach - consisting to date mainly of talking with the banks and other regulators like APRA - as "Macroprudential-Lite".
And he points out that the economic context has been an important catalyst for all the talk about macropru.
The RBA's own analysis of the exposure of investors (those 'older, wealthier, highly paid individuals" mentioned by John Peters) turned up nothing particularly scary.
"Still, the discussion on why investor housing debt is 'different' (prevalence of interest only loans, tax deductibility etc) and the fact that references to housing investors are littered throughout the FSR, are indicative of where the RBA staff's heads are at right now," Mr Jarman said.
"These issues would not be worth all the hand-wringing if the real economy was firm.
"The response in that case would be to raise rates."
And there was a reminder of the economy's underlying softness on Thursday, the day after the RBA's review, with news from the ABS that the weak uptrend in job vacancies had been interrupted with a fall between the August survey and the previous one, in May.
But economists were inclined to dismiss the dip as a minor setback rather than a turn for the worse.
AMP chief economist Shane Oliver said the figures, combined with other indicators of demand for labour, means "the basic picture remains one of forward looking indicators pointing to stronger jobs growth ahead."
