Australia Should Do More To Contain Real Estate Bubble, Climate Change-IMF Says | Invest News


SYDNEY (Reuters) – Australian authorities must toughen mortgage standards to cool a boiling housing market and reduce risks to the financial system, the IMF warned on Friday, while calling for more action on climate change .

In its regular assessment of Australia, the International Monetary Fund (IMF) warned that monetary and fiscal policy must remain stimulating to support the economy during a difficult period of coronavirus lockdown.

However, record interest rates have led to a surge in house prices and loans that must be contained, the IMF said.

“Soaring house prices raise concerns about affordability and financial stability,” the IMF said. “Macroprudential policy needs to be strengthened and lending standards closely monitored.”

The options offered included increasing interest service buffers and restrictions on how much banks can lend to borrowers with high debt-to-income and loan-to-value ratios.

In the longer term, supply-side reforms were needed, including more efficient planning, zoning and infrastructure. The IMF has also urged governments to provide tax support to low-income households and build more social housing.

On climate change, the IMF called on Australia to set a “time-bound” target to achieve net zero discounts.

“It would require faster progress,” the IMF said. “While politically difficult, implementing broad-based carbon pricing, along with measures to mitigate transition risks for affected industries and regions, would be the most effective way to reduce emissions. “

Treasurer Josh Frydenberg is due to deliver a speech on Friday saying Australia would face higher borrowing costs if the country fails to match other developed countries in their efforts to reduce carbon emissions to net zero. by 2050.

Economically, the IMF has judged short-term risks to be on the downside as Australia struggles to contain the Delta variant, but recent immunization progress should allow restrictions to ease and a recovery. during the December quarter.

The agency forecasts economic growth of 3.5% for 2021 and 4.1% for 2022.

(Reporting by Wayne Cole; editing by Richard Pullin)

Copyright 2021 Thomson Reuters.

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