A prominent former government economist fears Australia’s banks have loosened lending standards on home loans, boosting the risk of the property market overheating, according to The Australian Financial Review.
Quentin Grafton, who formerly ran the Australian Bureau of Resources and Energy Economics, will today say that the recent gains in house prices need to moderate.
“Should the house price growth spurt continue for much longer there will be an overshoot that will likely create an ‘overhang,’ ” he will say in a speech to the Australian Agricultural and Resource Economics Society, the AFR reported.
Now a professor at the Australian National University’s Crawford School, Mr Grafton believes a significant fall in house prices could see an “Australian-made credit crunch” given the big four banks’ reliance on offshore funds.