RBA flags housing risk

Reserve Bank of Australia deputy governor Guy Debelle has foreshadowed a tightening in lending standards increasing housing risk. 

At the same time, he indicated that the RBA was in no hurry to raise interest rates.

“There is a risk of a further tightening in lending standards in the period ahead.

“This may have its largest effect on the amount of funds an individual household can borrow, more than the effect on the number of households that are eligible for a loan, Mr Debelle told the CFO Forum.

“This, in turn, means that credit growth may be slower than otherwise for a time.

“To me, that has more of an implication for house prices, than it does for the outlook for consumption.”

Nonetheless he expected the RBA to keep rates steady for the time being 

“If the economy continues to evolve as expected, higher interest rates are likely to be appropriate at some point,” he said. “Notwithstanding this, the board does not currently see a strong case for a near-term adjustment in the cash rate,” he said.

This coincides with the minutes of the RBA board meeting released yesterday which showed that Australia’s central bank saw little reason to lift rates this month with inflation  below target and likely to remain subdued in the face of sluggish wage growth.

Apart from trade tensions, China and US-driven inflation driving up global interest rates, Mr Debelle said another big risk that wages growth would remain lower than first thought.

“There is a risk that it may take a lower unemployment rate than we currently expect to generate a sustained move higher than the 2 per cent focal point evident in many wage outcomes today,” he said.

An award winning author and journalist, commentator, lecturer, and speaker, Leon is a freelance business journalist who covers a range of areas including politics, strategy, globalization, leadership and all the big trends ahead. His main skill is summing up all the news that’s around. For the last 30 years, his main focus has been on management issues. He also produces two podcasts for RMIT University, Talking Business and Talking Technology. Leon has worked for Fairfax, News Limited, AAP and the Herald and Weekly Times.

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