Powered by MOMENTUM MEDIA
Powered by MOMENTUM MEDIA
subscribe to our newsletter

Australian and Chinese property prices influencing cash rate

The Reserve Bank of Australia weighed up housing conditions at home and abroad when pondering whether to reduce rates at its last meeting.

According to the minutes from the 7 April meeting, released yesterday, the board gave serious consideration to reducing the cash rate from its current record-low setting of 2.25 per cent.

One reason the board declined to reduce rates was because members saw advantages in allowing more time for the 25-basis-point rate cut in February to take effect.

Another reason was that members concluded that the responsiveness of borrowers and savers to changes in interest rates was “unusually uncertain” in a world of very low interest rates and high household leverage.

However, board members agreed that “further easing of policy may be appropriate over the period ahead” to boost the economy.

Advertisement
Advertisement

The board noted that the economy grew at a “below-average pace” in 2014, while growth in household consumption in the second half of 2014 was slightly below average.

However, this was partly offset by “strong” housing marketing, which was supported by very low interest rates and relatively strong population growth.

“Members remained alert to the possibility that the low levels of interest rates could foster imbalances in the housing market,” according to the minutes.

“The most recent data suggested that activity in the housing market had remained strong, but there had been little change to housing market conditions overall or in the growth of housing credit in early 2015.

“Although prices continued to rise rapidly in Sydney and, to a lesser extent, Melbourne, trends elsewhere were more varied.”

PROMOTED FEATURES


The board also noted that overall housing credit growth was likely to continue running at an annualised rate of about 7 per cent, and slightly above 10 per cent for investors.

Another factor the board considered was how a weakening Chinese property market is impacting the Australian economy.

This has increased the vulnerability of property developers and local authorities that rely on revenue from land sales to support their infrastructure investment, according to the board.

That in turn has contributed to the recent falls in iron ore prices, even though Chinese imports of Australian iron ore have continued to increase, the board said.

Australian and Chinese property prices influencing cash rate
mortgagebusiness

Latest News

For the second month in a row, the number of borrowers exiting repayment deferrals has outpaced those requesting them, according to APRA dat...

A rise in demand for detached housing in August – potentially driven by HomeBuilder – countered a sharp drop in the number of apartments...

While still expecting a change in the official cash rate, the major bank’s senior economist has backtracked from his view that this would ...

FROM THE WEB
podcast

LATEST PODCAST: Responsibilities and responsible lending

Do you expect to see strong uptake of the HomeBuilder scheme?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.