OECD: Australian Property Prices at Risk of ‘sharp correction’

Australia’s property markets are at risk of a “sharp correction” according to the Organisation for Economic Cooperation and Development.  The international organisation is the latest to join the chorus warning of the risk of a big fall in house prices.

“The continuing property market momentum adds to the risk of a sharp correction,” it wrote in its latest report on Australia.  The warning echoes concerns raised by the Australian Government’s Treasury secretary John Fraser this week that Sydney is “unequivocally” in a bubble.

The OECD warns the RBA not to cut interest rates again, saying “monetary policy firepower” should be held in reserve given the uncertainties about the outlook and inflationary effects on house and other asset prices.  To encourage growth it says the Government needs to consider sound policy, tax reform, cuts to red tape and competition boosting measures.  Treasurer Joe Hockey this morning told ABC Radio National’s Breakfast program that he has concerns about how his children will be able to afford a home.  However, he does not believe there is a bubble.