Here again Australia finds itself in quite a different position from that of many of the other advanced economies, both in terms of the construction cycle and prices. One challenge we face is to satisfy the increase in the demand for housing from a growing population, particularly given that we start the current upswing in the economy with a tight housing market.
To the extent that investment banks hold portions of the equity or lower-rated tranches of the securitized pools, they have strong incentives to screen effectively. Moreover, evidence from secondary markets that suggests that investors differentiate securitized pools according to the identity of the originating banks, and not just by credit ratings, provides some comfort that traditional certification functions are at work.