- RBA Governor does not 'target' house prices, but is watching them closely
- The RBA is more interested in debt levels
- Housing price overall index is back to 2017 levels
Under scrutiny today from the parliamentary House Economics Committee, RBA Governor Philip Lowe said the Reserve Bank of Australia “does not and should not” target house prices.
Instead, he argued that the focus was more on lending – which he suggested was “strong” and whose standards had “not deteriorated” – and debt levels.
Lower interest rates make debt levels more affordable. Any rise in rates would likely have real economic impacts on spending and investment as Australia emerges from its pandemic recession.
However, under questioning from committee Chair Tim Wilson, Dr Lowe did admit that the RBA was watching the property market closely, which he categorised as “resilient”.
Historically low interest rates, as set by the RBA, are feeding into a rising property market, with record high prices already being experienced across the country.
Could a further prolonged period of low interest rates lead to a runaway property market?
Dr Lowe did not seem to be that worried, as he noted that there had been large rises and falls in the property market over the past year, and that the housing price index was around the same level of four years ago.
These comments mirror those of the President of REIWA last week, Damian Collins, who argued that even if the Perth property market rose 25% this year, for example, that would only put the market back to 2014 prices.
The media seems divided on whether we will see property price bubble symptoms this year – some calling it a “race to the moon” and others saying this is all “asset price bubble hysteria”.
