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RBA Governor Stevens on US Housing

Reserve Bank of Australia Governor Glenn Stevens, on the housing downturn in the US:

With the effects of a buoyant housing market thought to have been an important expansionary force in the US in earlier years, the recent change in sentiment in that market is understandably regarded as significant. Australian experience suggests, as does that of the UK, that the end of a housing price boom can have noticeable effects on aggregate demand. But those experiences also suggest that such effects are manageable. In Australia’s case, the resources boom coincided with the housing moderation and helped to dampen its effects, but that has not been the case for the UK, which has had broadly similar economic outcomes to our own. On this basis, one would think that there are reasonable prospects for moderate growth in the US economy in the period ahead. But this is obviously an area of uncertainty, and even a favourable outcome involves slower growth in US aggregate demand in the future than we have tended to see over most of the past decade.

posted on 11 October 2006 by skirchner in Economics

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“In Australia’s case, the resources boom coincided with the housing moderation and helped to dampen its effects, but that has not been the case for the UK, which has had broadly similar economic outcomes to our own”

Very interesting point.  What was it that rescued the UK economy from the deflating housing boom, or did it not need to be rescued?  Did it coincide with the pickup of growth in the Eurozone?

Posted by .(JavaScript must be enabled to view this email address)  on  10/12  at  02:32 AM


I don’t think either economy needed “rescuing”, since their housing downturns were well within the terms of normal business cycle experience.  Australia’s late 2000 collapse in residential investment was actually much more serious and occured when commodity prices were still languishing (and yet still no recession!).

Posted by skirchner  on  10/13  at  04:54 AM



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