From left to right – Michele Bullock, Assistant Governor (Financial System), Luci Ellis, Assistant Governor (Economic), Philip Lowe, Governor, Guy Debelle, Deputy Governor. Source: House of Representatives Standing Committee on Economics.
  • RBA reaffirms current policy stance
  • RBA acknowledges investor borrowing for houses has increased
  • RBA emphasises ensuring lending standards do no deteriorate

Unsurprisingly, the Reserve Bank of Australia (RBA) remains committed to the economic recovery in its latest minutes meeting – reaffirming the historically low interest rate environment and the purchase of an additional $100 billion of government bonds (quantitative easing).

Members of the RBA acknowledged that house prices have continued to rise in May, reflected by above-average auction clearance rates and strong housing turnover.

Meanwhile, rental market conditions tightened outside of Melbourne and Sydney, with advertised rents increasing rapidly in regional areas and some capital cities.

The RBA has no intention of raising interest rates to cool rapidly rising house prices. Wage growth and inflation remained low, despite the strong recovery in employment. Members noted it would take a while for the labour market to be tight enough to generate wage increases consistent with achieving the inflation target of 3%.

Members also picked up on the trend that investor borrowing in the housing market is beginning to increase in recent months from low levels. This ongoing development, in addition to strong demand from owner-occupiers – particularly first home buyers – have prompted the RBA to emphasise the importance of maintaining lending standards.

As stated before by RBA Governor, Philip Lowe, he and the Australian Prudential Regulation Authority (APRA) are carefully monitoring trends in borrowing to ensure lending standards do not deteriorate.

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