A dangerous housing downturn could be just around the corner

Despite weak economic conditions, the RBA appears worryingly unconcerned about Australia's high level of mortgage lending and the systemic risk it poses to the financial system.

Speaking in Hobart yesterday, Reserve Bank of Australia governor Glenn Stevens talked down the broader concern regarding Australian housing, preferring instead to focus on the rising speculation in Sydney. In doing so it is clear the RBA simply doesn’t understand the systemic risk that high leverage poses for the broader financial system.

Stevens explained that the bank’s views on housing can be captured by four points.

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