- Dr Lowe says lifestyle changes have played a role in housing demand
- Broader facts such as low population growth have played a role
- Added that the Council of Financial Regulators would consider responses to lending standards
Philip Lowe, the Governor of the Reserve Bank of Australia (RBA), has once again made it clear that the RBA does not seek to target house prices.
The remarks were made at the Australian Financial Review Business Summit, where he congratulated the publication on celebrating its seventieth anniversary.
Dr Lowe previously made similar remarks during a House Economics Committee early last month where he said the RBA “does not and should not” target house prices.
During the Summit speech, Dr Lowe said the RBA Board has been discussing developments across the housing market.
These included rising housing prices nationally and other factors influencing prices, many of which we have reported here on The Property Tribune.
He referred to lifestyle changes such as buyers preferring houses over other dwellings such as apartments and strong demand outside the large cities.
Rather broadly, he referred to the slowest population growth in a century – mainly due to virtually no immigration and Australia’s low fertility rate – and fiscal measures such as HomeBuilder and greater incentives for home buyers.
“Time will tell as to how these various factors ultimately balance out, but history suggests that shifts in population growth can have large effects on the housing market.”
Dr Philip Lowe, RBA Governor
Next, he added his reiterating that the RBA does not target house prices, but did add “nor would it make sense to do so.”
Whilst recognising low-interest rates contribute to higher housing prices he said there are other ‘various tools’ to address concerns about rising house prices, adding that raising the cash rate won’t alleviate these concerns.
Monetary policy, the RBA’s ballpark, he said, should remain focused on the overall economic recovery, jobs and wages.
Towards the end of his speech, Dr Lowe said that the RBA is paying close attention to lending standards, due to the relationship between low-interest rates and increasing house prices. He has concerns looser standards would increase medium-term risks that could add to the upward pressure seen on house prices.
“Reflecting this, the Council of Financial Regulators has indicated that it would consider possible responses should lending standards deteriorate and financial risks increase. We are not at this point, but we are watching carefully.”
Dr Philip Lowe, RBA Governor
