Rapid compound growth in Australian house prices is over for good, according to Westpac CEO Gail Kelly.
According to a Herald Sun report, Ms Kelly told a closed session at the Prime Minister’s Economic Forum in Brisbane this week that the nation would never see another housing boom similar to the past decade.
Australians would no longer take out massive loans, she added, and instead banking would return to ‘old-fashioned values’, the Herald Sun reported.
Senior economist for the Housing Institute of Australia (HIA) Dr Harley Dale told Real Estate Buiness that he agreed with Ms Kelly’s comments.
“If you’re expecting the price of your home to rip along at a breakneck pace, you’re not going to get it,” he said. “We need to be careful how we define never, but anytime in the reasonable foreseeable future of over the next couple of decades, we’re not going to see it.”
“It’s because we had lots of factors that came together at the one time, we had structural lowering of interest rates from the mid to late 1990s, we had tax reform in the early 2000s, the lagged effect of financial and banking section liberalisation leading to a far more competitive lending market.
“And all that happened at the time when we had the baby boomer population bubble coming through the system, and it’s that one that really tells us that we won’t see that for a long time because there isn’t another population bulge like that coming through.”
According to the Herald Sun, Ms Kelly’s comments were backed by Reserve Bank governor Glenn Stevens, who said Australians were “grumpy” because of the dramatic change in the economy since the glory days of the housing boom.
Dr Dale agreed, claiming that Australians have gotten used to living in the fast lane.
“[Mr Stevens] is right drawing a link between subdued residential asset growth and levels of consumer confidence which seems to be at odds with Australia’s economic condition compared to the rest of the world.
“I don’t think the current house pricing market is completely to blame for low sentiment though, but it is a factor.”
Ms Kelly’s comments are at odds though with a claim by Credit Suisse in late May that local banks, facing sluggish lending growth, are becoming more desperate for business and are in danger of again embracing the dangerous lending standards that led to the collapse of banks elsewhere in the financial crisis.