Invest
Is the RBA creating a housing and equity price bubble?
The RBA has reduced the official cash rate to a new record low, with an economist fearing it could lead to a major asset bubble.
Is the RBA creating a housing and equity price bubble?
The RBA has reduced the official cash rate to a new record low, with an economist fearing it could lead to a major asset bubble.
Following an out-of-cycle rate reduction at the start of lockdowns in March, the RBA has followed market consensus and reduced the official cash rate to 0.10 per cent, down 15 basis points.
BetaShares’ chief economist, David Bassanese, believes the “drastic action” by the Reserve Bank of Australia (RBA) to reduce record-low interest rates and further quantitative easing is a last-ditch effort to hit inflation targets at the risk of a major bubble in housing and equity prices.
“Given the economic outlook has improved, rather than worsened, since the RBA last cut interest rates, it suggests the policy move is not based on new information but rather a major change in policy approach,” Mr Bassanese noted.
“Fear of the impact of persistent low interest rates on the financial system has been jettisoned, as has the fear of creating runaway asset prices.”
He pointed out that the RBA decided to now follow the rest of the world in trying to get the cheapest interest rates as well as aggressively printing money through quantitative easing.
“Spending $100 billion to buy long-term government bonds also won’t do much to lower key local lending rates, which are more sensitive to already rock-bottom short-term rates.
“That said, with interest rates now effectively zero, bond buying is the RBA’s new flexible policy tool. It can and likely will announce even greater bond buying in the months ahead – if only to continue to be seen to be doing something if the economic recovery falters,” Mr Bassanese said.
The economist noted that the RBA has followed its global peers in not only reducing the rate, but promising to keep it lower for longer.
“If, as I suspect, inflation continues to remain stubbornly low even as the economy improves – reflecting ongoing structural factors such as technology and globalisation – it remains to be seen whether an emerging asset bubble ultimately causes the RBA to lift rates well before its inflation target has been achieved.”
“Indeed, perhaps the greatest economic impact of the RBA’s bold new approach will be on asset prices – as the virtual guarantee of persistent low interest rates will push up valuations as investors chase yield and greater leverage,” Mr Bassanese concluded.
RELATED ARTICLES
About the author
About the author
Property
First‑home buyers now anchor Australia’s mortgage growth — but the risk maths is changing
Great Southern Bank’s revelation that nearly one in three of its new mortgages went to first‑home buyers is not an outlier. It is the leading edge of a broader market realignment powered by government ...Read more
Property
Home guarantee scheme shake-up challenges Australia’s housing market players
From 1 October 2025, the expanded Home Guarantee Scheme (HGS) materially widens what first-home buyers can purchase and where. By sharply lifting price caps and relaxing eligibility settings, the ...Read more
Property
GSB’s first‑home buyer play: turning policy tailwinds into market share
Great Southern Bank’s latest results show that nearly one in three of its new mortgages now go to first‑home buyers—evidence of a fast‑moving market reshaped by government guarantees, easing rates and ...Read more
Property
Why investors are fleeing and renters are scrambling in Australia's housing maze
Australia’s rental market is tightening even as individual landlords sell down. New data points to a multi‑year investor retreat tied to higher holding costs and regulatory uncertainty, while prices ...Read more
Property
Australia's 5% deposit guarantee: Unlocking gains while balancing risks in the market share race
Can a bigger government guarantee fix housing access without fuelling prices? Australia is about to find out. The Albanese government’s expanded 5% deposit pathway aims to help 70,000 buyers, remove ...Read more
Property
Australia's bold move the 5% deposit scheme shaking up the housing market
Can a government guarantee replace lenders mortgage insurance without inflating prices or risk? Canberra’s accelerated 5% deposit scheme is a bold demand-side nudge in a supply‑constrained marketRead more
Property
When rates drop but stress sticks: exploring Australia's mortgage arrears dilemma
Headline numbers suggest arrears ease as rates come down. The reality in Australia is messier: broad measures dipped into mid‑2025, yet severe delinquencies and non‑bank portfolios remain under ...Read more
Property
Property advice goes rogue as risks and opportunities knock on every door
A warning from the Property Investors Council of Australia has put a spotlight on the surge of unlicensed financial advice around property strategies. This is no niche compliance issue—it’s a ...Read more
Property
First‑home buyers now anchor Australia’s mortgage growth — but the risk maths is changing
Great Southern Bank’s revelation that nearly one in three of its new mortgages went to first‑home buyers is not an outlier. It is the leading edge of a broader market realignment powered by government ...Read more
Property
Home guarantee scheme shake-up challenges Australia’s housing market players
From 1 October 2025, the expanded Home Guarantee Scheme (HGS) materially widens what first-home buyers can purchase and where. By sharply lifting price caps and relaxing eligibility settings, the ...Read more
Property
GSB’s first‑home buyer play: turning policy tailwinds into market share
Great Southern Bank’s latest results show that nearly one in three of its new mortgages now go to first‑home buyers—evidence of a fast‑moving market reshaped by government guarantees, easing rates and ...Read more
Property
Why investors are fleeing and renters are scrambling in Australia's housing maze
Australia’s rental market is tightening even as individual landlords sell down. New data points to a multi‑year investor retreat tied to higher holding costs and regulatory uncertainty, while prices ...Read more
Property
Australia's 5% deposit guarantee: Unlocking gains while balancing risks in the market share race
Can a bigger government guarantee fix housing access without fuelling prices? Australia is about to find out. The Albanese government’s expanded 5% deposit pathway aims to help 70,000 buyers, remove ...Read more
Property
Australia's bold move the 5% deposit scheme shaking up the housing market
Can a government guarantee replace lenders mortgage insurance without inflating prices or risk? Canberra’s accelerated 5% deposit scheme is a bold demand-side nudge in a supply‑constrained marketRead more
Property
When rates drop but stress sticks: exploring Australia's mortgage arrears dilemma
Headline numbers suggest arrears ease as rates come down. The reality in Australia is messier: broad measures dipped into mid‑2025, yet severe delinquencies and non‑bank portfolios remain under ...Read more
Property
Property advice goes rogue as risks and opportunities knock on every door
A warning from the Property Investors Council of Australia has put a spotlight on the surge of unlicensed financial advice around property strategies. This is no niche compliance issue—it’s a ...Read more
