(Australian Associated Press)
The Reserve Bank is not fazed by rising housing prices or by the high auction clearance rates reported recently.
It’s unlikely to lower interest rates again soon, but that’s not because it’s worried about over-inflating the housing market.
Average prices for homes on the mainland state capitals have rocketed ahead by eight per cent in the past year, while clearance rates are at 15-month highs.
But the minutes of the RBA’s latest monetary policy meeting, released on Tuesday, show that the central bank is looking below the surface of the numbers.
“Conditions in established housing markets had generally eased over 2016,” the RBA said in the minutes of its board’s September 6 meeting.
Not only has the growth rate slowed, but rental vacancy rates have risen to around their long-run average.
“Other indicators for the housing market had also pointed to weaker conditions than a year earlier,” the RBA said.
Those indicators included a fall in the volume of auctions as well as a drop in the number of transactions in the private treaty market, where four fifths of sales are made, and an upward drift in the time taken to conclude them .
And the trend in housing loan approvals had been flat, in line with the recent tightening of credit standards and lower turnover, the RBA said.
This is all before a looming wave of supply of new homes crashes through the market.
“Members noted that there continued to be a considerable volume of apartments scheduled to be completed over the next couple of years, particularly in the eastern states,” the RBA minutes said.
The significance of all this for the RBA is that the housing market, despite the superficial signs of strength, would not stand in the way if the central bank saw the need for another economy-boosting interest rate cut.
Not that the minutes offered any sign that a cut is on the agenda.
The minutes said the RBA board “judged that the current stance of monetary policy was consistent with sustainable growth in the Australian economy and achieving the inflation target over time”.
Short of actually cancelling its October board meeting, the RBA could not be any clearer that there is very little chance of it cutting the cash rate next month.