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Creeping house price rises a non-issue for central bank
The governor of the Reserve Bank of Australia (RBA) has hinted at further cash rate cuts despite holding a belief that the economy has reached a slow turning point thanks to house price rises.
Creeping house price rises a non-issue for central bank
The governor of the Reserve Bank of Australia (RBA) has hinted at further cash rate cuts despite holding a belief that the economy has reached a slow turning point thanks to house price rises.
Dr Philip Lowe made the statements in a speech at the Armidale Business Chamber, dismissing concerns that housing prices are becoming an issue even if current growth projections meant they would reach a new record high in one and a half years.
Acknowledging it as true that prices have risen for a few months in a row now, he argued that people “have to remember for 18 months in a row houses fell in Sydney and Melbourne and they came down 15 per cent and they have just come up a couple per cent”.
“So, I am not particularly concerned about that,” Dr Lowe said, despite expecting prices will continue to rise.
“It seems quite possible that we could have a period now of rising housing prices because construction is slowing and population is still rising quite quickly.”
He noted that underlying drivers of housing prices are rearing their heads.
At the same time, the governor conceded that many households are “a bit reluctant to borrow, which is not surprising when their incomes aren’t growing strongly and banks are still reluctant to lend”.
But, from his position, Dr Lowe doesn’t see any of the above as cause for concern.
“From a monetary policy perspective, it’s not an issue at the moment, but it would become an issue if credit growth accelerated rapidly,” he said.
“But I see no signs of that at the moment.”
Instead, the governor hinted at further relief for mortgage holders, although he did note that banks might not pass on any further interest rate cuts in full.
“The market is forecasting cuts and further easing of monetary policy over the next year, and I think that is a reasonable expectation,” Dr Lowe concluded.
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