Cost of housing entrenches rich-poor divide, says Lowe

within society,” Reserve Bank of Australia Governor Philip Lowe told a Brisbane lunch yesterday.

“Because if you come from a wealthy family ... you’ve got the bank of mum and dad that you may or may not be able to rely on.

“But if you don’t come from such a family, it’s much, much harder to get into the housing market than it once was. And I think that’s a social problem.

“(It’s) nothing the Reserve Bank can do anything about. But I think it’s quite a significant issue – it affects the mobility within society and reinforces the existing distribution of wealth, which can’t be a good thing.”

Dr Lowe was speaking at an Economic Society of Australia function, with his speech focusing on housing affordability and household debt.

He shot down notions, recently raised in political circles, of letting young people tap their superannuation to get into the housing market.

“You don’t address housing affordability by adding to demand,” he said.

“You address it by adding to supply – it’s the supply of dwellings and the supply of well-located land.”

Dr Lowe said any economic downturn could become amplified because people would essentially cut spending harshly because of an already high level of indebtedness.

“This could prompt a sharp contraction in spending, as they try to get their balance sheets back into better shape,” he said.

But he maintained that regulatory stress tests “confirm that the banks are resilient to large movements in the price of residential property”.