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Home Features Tom Burton: Don’t mention the B word in Sydney
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DEPARTMENTSReserve Bank of Australia, NSW Treasury
TAGS infrastructure, Business/Finance, Housing, economics, Sydney, housing affordability, Macroeconomics, NSW budget, Boom and bust, Business cycle, Real estate bubble, Economic bubbles, Economic history, Financial crises, Inflation
As NSW spends up big on infrastructure, health and education, no one seems to want to talk about the real estate bubble threatening to ruin the party.
What bubble economy?
The smell of high octane speculation is evident every successive Saturday in the nation’s biggest city. Add the likes of RBA governor Glenn Stevens, and federal Treasury secretary John Fraser, angsting about the “crazy” 30% increase in Sydney houses prices, and you would have hoped the possibility of a damaging bust would have featured large in today’s NSW budget papers.
Instead there was not a mention of the words ‘bubble’ or ‘bust’. The only B word NSW Treasury was prepared to utter was that the risks were “evenly balanced”. Shades of then US Federal Reserve chief, Alan Greenspan, who months before the global crash of 2008 also declared all the risks were in balance.
The closest Treasury was prepared to go was to muse about the dangers of a medium-term “disorderly correction” in housing prices, if interest rates continue to be low for a prolonged period — as most sensible economists are predicting.
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Tom Burton is publisher of The Mandarin based in Melbourne. He has served in various public administration roles, specialising in the media and communications sector. He was a Walkley Award-winning journalist and executive editor of The Sydney Morning Herald. He worked as Canberra bureau chief for the Australian Financial Review and as managing editor of smh.com.au. He most recently worked at the Australian Communications and Media Authority.
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