Australia’s central bank will maintain low interest rates to support the country’s ongoing economic recovery and surging housing market, buoyed by its busiest Easter auction market on record.
Reserve Bank of Australia governor Philip Lowe said the recovery was well under way and had been stronger than forecast with a drop in unemployment to 5.8 per cent in February.
He said the “above-trend growth” was expected to continue into 2021.
“Housing markets have strengthened further, with prices rising in most markets,” Lowe said.
“Given the environment of rising house prices and low interest rates, the bank will be monitoring trends in housing borrowing carefully, and it is important that lending standards are maintained.”
Housing credit growth to owner-occupiers has increased with significant demand from first home buyers, while investor credit growth has stalled.
It was the busiest Easter on record—874 properties went under the hammer during the weekend with about 80 per cent selling at auction.
Canberra chalked up the highest auction rate for the weekend with 93.8 per cent of properties sold at auction, according to Corelogic data.
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CommSec chief economist Craig James said the RBA’s latest announcement reinforced the opinion that the pre-conditions for a higher cash rate would not be met until 2024.
“The Reserve Bank remains committed to [a] cash rate of 0.10 per cent until 2024,” James said.
“No further stimulus is either warranted or likely. A ‘strong’ economic recovery is under way, led by a solid job market and healthy retail spending.”
James said there were risks for a stronger-than-expected economic outcome that could drive inflation and wages higher.
“While inflationary pressures are largely confined to certain industries and regions, it is important to watch for any spread or broadening of the cost pressures.”