OECD Jumps On Apartment Doomsayers Bandwagon

The Organisation for Economic Co-operation and Development (OECD) has warned of a "dramatic and destabilising" end to the current housing boom.

In its latest economic report on Australia released today the OECD said economy-wide growth in Australia was projected to be just under 3% in 2017.

"Negative effects from shrinking mining investment are set to ease and new LNG production will boost exports," the OECD said.

"Exchange rate depreciation and supportive macroeconomic policy have helped rebalance activity towards non-mining sectors. Employment growth will drive a further decline in the rate of unemployment. Household consumption is expected to remain solid, helped by further erosion of the household savings ratio.

"The pick-up in activity will not generate significant inflationary pressure, due to remaining economic slack.

"Australia’s exposure to commodity-market developments, particularly those linked to the Chinese economy remains an important source of uncertainty and risk. Domestically, the unwinding of housing-market tensions to date may presage dramatic and destabilising developments, rather than herald a soft landing."Following the RBA's decision to reduce rates in May to 1.75%, the first rate change in 12 months, the OECD said it envisages no further easing and assumes that policy-rate increases begin in 2017.

"Nevertheless, room for further rate cuts remains in the event of below-par growth. Fiscal policy needs to let the automatic stabilisers operate while keeping a medium-term objective of reducing the public-debt burden."