RBA won't lift cash rate to slow property price gains

The RBA governor noted the lift in the net wealth of the household sector makes households well placed to start spending again after lockdown

RBA won't lift cash rate to slow property price gains
RBA won't lift cash rate to slow property price gains

Housing prices are 19 per cent higher than they were before the pandemic and Australian equity prices are around 10 per cent higher, the RBA governor Dr Phillip Lowe has noted.

"This lift in the net wealth of the household sector is one of the things that suggest that once the restrictions are eased, households will be well placed to start spending again," he said.

He noted monetary policy was contributing to higher house prices at the moment.

But the governor said the central banks won't lift the cash rate to cool the property market.

"I want to be clear that this is not on our agenda," he said.

"While it is true that higher interest rates would, all else equal, see lower housing prices, they would also mean fewer jobs and lower wages growth. 

"This is a poor trade-off in the current circumstances.

"That is not to say that there aren't public policy issues to be addressed here. 

"On the financial side, the issue is the sustainability of trends in household borrowing. 

"We are continuing to watch this closely, with the Council of Financial Regulators discussing possible regulatory steps if lending standards deteriorate or credit growth accelerates too much."

He said society-wide concerns about the level of housing prices were "not best addressed through increasing interest rates and curbs on lending."

"While monetary policy is contributing to higher housing prices at the moment, the way to address these concerns is through the structural factors that influence the value of the land upon which our dwellings are built. 

"The factors include: the design of our taxation and social security systems; planning and zoning restrictions; the type of dwellings that are built; and the nature of our transportation networks. These are all obviously areas outside the domain of monetary policy and the central bank.

"Our job is to achieve the inflation target and support the return to full employment in Australia. 

"The package of policy measures we have put in place has us on a path to do that. 

"Delta is delaying progress, but it is not expected to derail our resilient economy," Dr Lowe said in a speech supporting the Anika Foundation

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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