We must not allocate capital so poorly, recreate “Heads I Win, Tails the Taxpayer Loses” incentives, and sow the seeds of another lending excess. There are better ways to do it. Let me offer five options: 1. Private capital raising: The healthier public sector banks could have raised private capital by issuing deep discount rights in 2013, and some can still do so now.
Consequently, advertised rents are declining, and the rental inflation component in the CPI, which captures existing rents, is close to zero for Sydney (Graph 9). The vacancy rate in Melbourne has remained low as the substantial increase in new housing supply has been largely absorbed by strong population growth. Hence rental inflation in Melbourne has remained around 2 per cent.