You ought to check out an auction in Melbourne one weekend if you think the RBA and Treasury “have got it under control”. On any measure the amount of money people are currently spending on reisdential property is absolutley insane. Absolutely insane !.

I’m not the only who has recently walked away from an auction thinking “why/how the hell would you pay that much for a house” and “how the hell do you ever expect to make your money back” ?.

I think the whole shortage of supply is a bit of a furphy as well, because we’re now finding in innercity Melbourne that it’s a hell of a lot easier to find rentals than 2 years ago. Rents also don’t seem to have increased, if anything they have stagnated. In Melbourne at least there seems to be an absolute mania around purchasing houses at the moment.

Personally, I think I’d rather buy up whole neighbourhoods in Detroit than one house in the Western suburbs of Melbourne. At least my rental returns as a slumlord would cover my purchase costs in about 3-4 years !!!.

Japan - a government heavily involved in forex trading to keep the Yen strong for political purposes. Meaning that at the time the Yen had to decline to encourage exports, they kept it high.
Australia - a dirty float, but less involved in protecting the currency

Japan - A glut of domestic and international savings to invest meaning some extremely dodgy loans being offered to dodgy businesses. Defaults on these loans causing lack of bank confidence, meaning punters not spending or investing. Asset prices dropping due to lack of buyers and defaults.
Australia - Basel 2 standards enforced (we had our dodgy loans back in the 80’s). Consumer spending strong.

Japan - Big deflationary pressures causing real interest rates to be too high for investment. Causing asset prices to decline. Also meaning that Central bank can’t stimulate growth using Monetary policy (as prices decreasing at same or faster rate than Japan Central bank can decrease interest rates)
Australia - Real Interest rates under control. Asset prices still strong

Japan - Liquity trap causing a lost decade of negative GDP growth
Australia - One quarter of negative growth. Starting to see positive GDP growth now.

While Steven Keen is an important voice in economics, and his warnings on the Current Account are worthy of consideration, i think he is wrong about asset prices. The Reserve and Treasury have got it under control.