Australia’s interest rates to remain as low as 0.1%
The bank will be keeping a close eye on the property market and lending standards, given the environment of rising housing prices and low interest rates
The Reserve Bank of Australia (RBA) holds interest rates at the historic low level of 0.1 percent, maintaining the current cash rate despite record house price growth and home loan commitments, reported 9News.
RBA Governor Philip Lowe mentioned at the end of last year that the central bank had predicted to retain rates at one percent for a plan of three years, instead preferring other economic measures to stimulate spending.
In his monetary statement last month, Governor Lower said that the RBA will be carefully examining the property market to make sure borrowers are not taking mortgages on risky terms.
“Housing markets have strengthened further, with prices rising in all major markets. Housing credit growth has picked up, with strong demand from owner-occupiers, especially first-home buyers,” said Lowe.
“Given the environment of rising housing prices and low interest rates, the Bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”
AMP Capital’s chief economist, Shane Oliver, said he anticipates rates to increase sooner than the RBA’s three-year target.
Oliver said, “While the economy is recovering faster than expected, the RBA is still a long way away from seeing its stated requirements for a rate hike – being a tight jobs market, wages growth well above three percent and actual inflation sustainably within the two to three percent target range.”
More: Australians offer up to $100 extra per week to secure a home
“So a rate hike is still a fair way off although I think it will come before the RBA’s expectation for ‘2024 at the earliest’,” he added.
Mala Raghavan from the College of Business and Economics at the University of Tasmania said the central bank would contemplate lifting above one percent only when several indicators have been met.
“The cash rate will only start moving upwards when inflation and unemployment rates are comfortably above two percent and below six percent respectively. It might take a while to achieve these targets,” Raghavan said.
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