RBA holds rates steady
What’s the RBA thinking?
There has been little discernible change in economic indicators since last month’s RBA meeting. GDP has rebounded, inflation and wage growth remain soft and employment growth has slowed.
The east coast housing markets remain strong despite recent, out of cycle, increases in mortgage lending rates from the majority of banks. This remains a concern for the RBA; especially when the high level of household debt is taken into consideration.
Source: RBA, ABS, CoreLogic
- The combination of property market and economic situations has seen the RBA hold rates steady at the record low of 1.50%.
- Key indicators
- Capital city home values rose 1.4% in March and 12.9% over the past year.
- Hobart saw the largest value growth over the past quarter up 5.6% followed by Sydney (5.0%), Canberra (5.1%) and Melbourne (4.2%).
- New listings have begun to pick-up across most capital city markets.
- Nationally, new listings are up 4.9% and total listings are down -4.0%, compared to this time last year.
- Canberra has seen the biggest rise in new listings up 22.1% compared to this time last year. This is followed by Sydney (14.3%), Hobart (13.1%) and Melbourne (11.8%).
- The unemployment rate increased from 5.7% in January 2017 to 5.9% in February 2017.
- Australia's population grew 1.5% in the year to September 2016.
- The Australian dollar fluctuated between US$0.74 and US$0.77 over the past month.
A big focus, for the RBA, moving forward will be the property markets response to recent moves by APRA to de-risk mortgage markets and cool investor demand.
These new regulations combined with recent moves by banks to increase mortgage rates should see price growth moderate; especially in Sydney and Melbourne. Positively, listing number have begun to increase. Low listing numbers have been a key driver of strong price growth over the past two years. The recent rise, in new listings, may indicate that property owners now view the market nearing the price growth peak.
Given the varying strengths of property markets and local economies around the country, it is expected that the RBA will hold the official cash rate steady over the remainder of 2017.