RBA governor Glenn Stevens warns on foreign investment, housing inequality

The Reserve Bank governor has cautioned that Australia should be wary about selling off assets to overseas investors.
Glenn Stevens has told The Australian and The Wall Street Journal in an interview that Australia should be careful about selling existing assets offshore because it does not create new capital for the country.
The RBA governor said he is more concerned about China’s transition to a market economy than Britain leaving the European Union and other problems in Europe.
Mr Stevens said it is harder to work out what’s happening in China than in advanced economies.
“We don’t have the extent of data, the reliability of data, the extent of coverage and knowledge and understanding outside of China that you have say about America or Europe,” he observed.
“That’s not a criticism of the Chinese it just really reflects the sheer speed with which China has become so important.
The long-serving Reserve Bank governor, who finishes his decade at the helm next month, said it is better to encourage foreign investors to buy into new businesses, such as the investment that funded the mining boom.
“Maybe some more clarity about what we mean by foreign investment, what kinds of foreign investment are better than others, what kind helps us grow our capital stock and our country and how to manage all of these things, that’s probably a constructive debate we might hope to have,” Mr Stevens said.
High home prices ‘perpetuate disadvantage’

Mr Stevens also warned about increasing social problems because of high home prices.
He noted that future generations are being locked out of home ownership and it may be getting harder to get on the property ladder without help.
“A lot of people of my generation are actually going to find themselves, if they haven’t already, helping their children into the housing market because that may be almost the only way their children can enter the Sydney market anyway,” Mr Stevens warned.
“I suspect that will happen a lot.”
He said parents helping their adult children buy homes is also decreasing household wealth.
“That of course means, for people of my age, the wealth we think we have in our house actually we don’t have quite as much as we thought because we’re going to have to give some of it to the next generation,” the RBA governor added.
Mr Stevens pointed out that some people may never get into the housing market and are destined to remain lifelong renters.
“If we come from a rental household ourselves then we are not going to have that equity to pass to the next generation.”
Certain types of disadvantage, therefore, are going to be perpetuated in that next generation.

China risk levels ‘a bit uncomfortable’

The RBA governor said he is more concerned about China’s transition to a market economy than Britain leaving the European Union and other problems in Europe.
Mr Stevens said it is harder to work out what’s happening in China than in advanced economies.
“We don’t have the extent of data, the reliability of data, the extent of coverage and knowledge and understanding outside of China that you have say about America or Europe,” he observed.
“That’s not a criticism of the Chinese it just really reflects the sheer speed with which China has become so important.
The extent of the risk relative to the level of our understanding and knowledge is a bit uncomfortable.

Mr Stevens will step down next month and be replaced by current RBA deputy governor Philip Lowe.

http://mobile.abc.net.au/news/2016-08-17/rba-governor-stevens-warns-on-foreign-investment/7751886

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