Caton says based on a simplistic comparison with the US housing market, an argument can be mounted that Australian housing prices are overpriced when measured in terms of disposable income. 

“But when other countries are thrown into the mix, the argument that we have a housing price bubble in Australia is much harder to sustain. 

“The fact is our housing prices are in broad alignment with many similar economies, so it’s my belief talk of a housing bubble is misplaced. 

Caton also had other good news for the audience of mortgage brokers when he predicted lower rates and higher housing prices over the next 12 months. 

“Although I’m not as bullish as some other economists on lower interest rates, I still expect at least one cut in the cash rate and possibly two as the Reserve Bank prepares for a downturn in mining.” 

On housing credit and house prices, he said expects a pick-up over the next year, with Western Australian – “not unsurprisingly” – to lead the pack. “I suspect we will be back at next year’s conference and housing prices will have risen over the past 12 months.” 

Caton remained relatively optimistic about the global economy, and its impact on Australia, while noting there were still major economic problems. 

“The Euro-zone remains an issue, but it’s more about contagion across Europe than a Greece in isolation. Greece per se is not an issue; its economy is small. It’s Italy and Spain we have to worry about. That said the trend in the long-term bond rate in those two countries in the past three months gives ground for some confidence. 

“The US is facing an inadvertent massive tightening of fiscal policy with tax increases and spending cuts totalling close to 5% of GDP in early 2013 (the so-called fiscal cliff) because of past policy decisions. Were this to happen, the US would be pushed back into recession, but commonsense should prevail. 

“China, too, remains a worry, but only because it’s been such a good news story for Australia. Measured by this yardstick, the commodity boom we have enjoyed because of China’s strong growth is unlikely to continue. But we will still enjoy healthy terms of trade with China,” he says.

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