According to the Organization for Economic Cooperation Development (OECD), the leading authority on the world economy, the Australia real estate market is at risk for a "sharp correction." The international organization has joined other groups in issuing warning about the risk of a big fall in house prices in Australia.
As stated by ABC news, "The continuing property market momentum adds to the risk of a sharp correction." News.com.au also said that if commodity prices continue to fall, it would substantially affect the overall revenue and cutbacks in production.
The warning was similar to the concerns that were raised by John Fraser, Australian's Government's Treasury Secretary. He reportedly said this week that Sydney and other parts of Melbourne are "unequivocally" in a housing bubble.
Because of this warning, the OECD reportedly advised the Reserved Bank of Australia to not cut interest rates further, considering the uncertainties of the forecast and the effects on the houses and other asset prices. They said that "monetary policy firepower" should be held in standby given the present circumstances in the Australia real estate market.
Also, according to News.com.au, the OECD pointed out that the May budget did not discourse results, which were larger than expected. They then advised the fiscal policy to continue in providing support. The organization encourages the government to consider a sound policy, tax reforms as well as some competition-boosting methods.
On the other hand, Treasurer Joe Hockey reportedly insisted that the best way to respond to the house bubble in the Australia real estate market is to increase residential construction. In his ABC radio interview, he said that the cities need to "get the stock up." He also cited figures showing an 18 percent increase in the number of residential construction that started in 2014. He also noted the housing bubble in the cities of Sydney and Melbourne, saying that the global experience only happened when the supply surpassed the demand, and this was not the case in Australia.
