Tougher Home Lending Restrictions Urged to Help RBA

Australia needs tougher measures to rein in booming property prices and give the central bank maximum flexibility on interest-rate settings, Pacific Investment Management Co. said.

“Households are exhibiting irrational exuberance,” Pimco’s Aaditya Thakur and Laura Ryan said in a research report in Sydney. “They are placing little weight on broader fundamentals like unemployment that may be more representative of future incomes or asset price returns, increasing the likelihood of asset price bubbles.”

Pimco’s call for stronger home lending curbs comes after Secretary to the Treasury John Fraser warned Sydney’s property market was in a “bubble” and central Bank Governor Glenn Stevens described elements of it as “crazy.”