RBA Monitors House Price Risks

Australia’s central bank said it will monitor risks from rising property prices as policy makers reiterated a period of stability in record-low interest rates.

“Housing prices were continuing to increase in the larger cities and members considered that the risks associated with this trend warranted ongoing close observation,” the central bank said in minutes today of its Sept. 2 meeting, where it kept the cash rate at 2.5 percent. “On the other hand, the exchange rate remained above most estimates of its fundamental value, particularly given the declines in key commodity prices.”

Governor Glenn Stevens has lowered borrowing costs to encourage non-mining businesses to boost spending and take on risk in order to compensate for waning mining investment. He has signaled further rate cuts are unlikely as they would foster a build-up of risk in an economy where the housing industry is booming. The minutes set out some of the dangers in an outline of the central bank’s forthcoming financial stability report.

Bloomberg

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