The Reserve Bank of Australia’s six-monthly Financial Stability Review is expected to highlight again the risks in the household sector associated with rapid house price gains, according to a leading economist.
The RBA report, due to be released tomorrow, is likely to remark that, on the whole, the Australian financial system remains “in good shape”, according to AMP Capital chief economist Shane Oliver.
“The minutes from the last RBA board meeting signalled a clear bias towards cutting rates again.
“However, while another easing was considered at the last meeting it was clear that the Reserve was in [no] rush, deciding to allow more time for the economy to adjust to the last cut and to await more data on the economy.
“This could well carry over to the April meeting meaning that the next cut may not come till May.
“A speech by governor Stevens did nothing to alter the view that rates will fall further but that the RBA is not in a hurry,” Mr Oliver said.
The last stability review, published by the central bank on 24 September 2014, made an impact after it included the comment that the composition of housing and mortgage markets “is becoming unbalanced”.
“This has been most evident in the current strength of investor activity in the housing market, and in its concentration in Sydney and Melbourne,” it said.
“The apparent increase in the use of interest-only loans by both owner-occupiers and investors might also be consistent with increasingly speculative motives behind current housing demand.”
The increasing household appetite for risk over the past year has been fuelled by low interest rates, inflated house prices and strong price competition among lenders, the RBA said.
“Accordingly, household credit growth has picked up, almost entirely driven by investor housing credit, which is growing at its fastest pace since late 2007,” it said.
The RBA stressed that the increase in household risk appetite is most evident in the continued strength of investor activity in the housing market, particularly in Sydney and Melbourne.