Dwelling investment close to fastest pace seen in a decade: RBA meeting minutes

Dwelling investment close to fastest pace seen in a decade: RBA meeting minutes
Dwelling investment close to fastest pace seen in a decade: RBA meeting minutes

The Reserve Bank of Australia’s meeting minutes for the July monetary policy meeting that saw the interest rate held at 2.5% has made particular note of the increase in dwelling investment.

Pointing to the noticeable increase in the March quarter, and mentioning that over the six months to March investment levels are running close to the fastest pace seen in a decade, it doesn’t appear that the RBA is as yet concerned.

"Dwelling investment increased noticeably in the March quarter and, over the six months to March, was running at close to the fastest pace seen in around a decade," the minutes explained.

“Residential building approvals had declined somewhat in recent months, but they remained at relatively high levels and both work yet to be done and loan approvals for new dwellings pointed to further strong growth in dwelling investment in coming quarters.

“At the same time, there had been signs of a tempering in conditions in the established housing market.

Members were said to have particularly observed that looking past the monthly volatility, housing price inflation was recorded as slowing in recent months, auction clearance rates had fallen from their last year highs and loan approvals were little changed over the past six months.

Overall, they noted that GDP growth was above trend in the March quarter, and resource exports were expected to expand in coming quarters, even if not at such a rapid pace as previously.

A gradual improvement in the non-resource sector, and growth in residential construction was a prospect, “despite some easing of conditions in the established housing market over recent months”.

The exchange rate was also noted as high when compared to historical rates, and therefore offering less assistance in achieving economic growth than might be otherwise expected.

It appears the factors they will are now keeping under close watch is the extent to which the low interest rates offset the decline in mining investment that is anticipated, and the effect of planned fiscal consolidation.

A period of interest rate stability was noted as the most prudent course given current indications.

Jennifer Duke

Jennifer Duke

Jennifer Duke was a property writer at Property Observer

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