In his monetary statement, RBA Governor Philip Lowe noted rising property prices but maintained that inflation was not yet high enough to justify a rise in interest rates
Australia’s official cash rate will remain on hold at the record-low level of 0.1 per cent.
The Reserve Bank of Australia (RBA) today decided to keep the interest rate on hold despite criticism that historically low rates were supercharging the property market.
In his monetary statement, RBA Governor Philip Lowe noted rising property prices but maintained that inflation was not yet high enough to justify a rise in interest rates.
Housing prices are continuing to rise, although turnover in some markets has declined following the virus outbreak, Mr Lowe said.
Housing credit growth has picked up due to stronger demand for credit by both owner-occupiers and investors. The Council of Financial Regulators has been discussing the medium-term risks to macroeconomic stability of rapid credit growth at a time of historically low interest rates, he said.
In this environment, it is important that lending standards are maintained and that loan serviceability buffers are appropriate, he said.
In a speech two weeks ago, RBA Assistant Governor Michele Bullock said the central bank was forced to slash rates as an economic driver during COVID-19.
The Reserve Bank reduced interest rates to historically low levels and introduced a suite of other policy measures to lower funding costs and interest rates across the economy, Ms Bullock said. The banks offered borrowers deferrals on their loan repayments. There were moratoriums on evictions and rent relief for businesses and households.
She said: The idea was that we were building a bridge to get us over the economic crevasse created by the pandemic.
Despite interest rates holding at 0.1 per cent since November 2020, the true pocket cost of Aussie mortgages may change over time.