By: ssec

In reply to Ricardo.

thanks, the graph seems to match very well the RBA rates and seems to point to further cuts if conditions do not change.

I am no expert, but if I liquidate my term deposit to purchase a property I will most likely create a new loan which should increase not decrease the total money supply? Also I’ll pay someone this money which will end up back in the bank or a bigger property with a bigger mortgage, once again increasing the total money supply?

For me house price increases require fast credit growth, so the current increases can only be explained by cheaper properties being purchased (e.g. by investors) for rental purposes and/or lower total transaction volumes (same amount of money used to purchase fewer properties).

The graph matches the 2006-2008 housing boom and the 2010 too: when broad money increases fast so do house prices and rates go up. In this case it does not seem to reflect what is reported in the field.