CANBERRA, AAP – Reserve Bank governor Philip Lowe has warned lenders he doesn’t want to see standards slip at a time of rising house prices.
As expected, the central bank left its key interest rates, including the cash rate, at a record low 0.1 per cent at Tuesday’s monthly board meeting.
In his post-meeting statement, Dr Lowe noted housing markets have strengthened further, with prices rising in most jurisdictions, while housing credit growth to owner-occupiers has picked up, with strong demand from first home buyers.
“Given the environment of rising housing prices and low interest rates, the bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained,” Dr Lowe said.
Otherwise, he reiterated the bank would not increase the cash rate until inflation was sustainably within the two to three per cent inflation target.
For this to occur, wages growth will have to be materially higher than it is currently, which will require significant gains in employment.
“The board does not expect these conditions to be met until 2024 at the earliest,” Dr Lowe said.
The latest weekly consumer confidence survey will be released on Wednesday, a pointer to future household spending, although conducted prior to the RBA board gathering.
Last week, the ANZ-Roy Morgan confidence jumped 1.7 per cent to its highest level since 2019, buoyed by improved weather conditions along the east coast after heavy rainfall and floods.
However it did not take account of Greater Brisbane’s three-day snap COVID-19 lockdown in the run up to Easter.
The Australian Industry Group/Housing Industry Association performance of construction index for March is also released.
In February, all four sectors of the index recovered strongly, with housing activity surging to a record high.