Time to 'short' Australia's housing bubble (update 2). Australian liquidity crunch?

If Australia's Reserve Bank sends (a bizarrely timed interest rate cycle) the AUD close to parity (against the US) not only will Australia lose it's competitiveness with exports (South America export countries begin a FX devaluation cycle), it may attempt to stave off a liquidity crunch (higher AUD will send hot inflows into the economy). A double edge sword that the RBA is walking on (attempt at building up a liquidity backstop with AUD moneyflows), which will end up sending the overinflated and highly in-debited housing market into a mega bust.

"AUSTRALIAN banks' reliance on overseas funding and the high level of household debt loom as ''significant'' economic risks, Treasury has told the government in a briefing.

The nation's top economic advisers yesterday made public the incoming government brief known as the ''Red Book'' after a flurry of freedom-of-information requests."