The housing market remained a focus for the Reserve Bank of Australia (RBA) in its most recent meeting minutes.
Mixed conditions perpetuate across the nation in different housing markets. But the central bank also noted economic conditions were improving.
In the minutes, the board noted there had been a drop in residential real estate investments in the March quarter. The states most affected were Queensland and NSW, with wet weather blamed for the fall. ‘While the flow of new project approvals had been noticeably lower in prior months, the large pipeline of projects was expected to support building activity at a high level over the subsequent year or so,’ the board noted.
According to the RBA, the Sydney and Melbourne markets continued to be the strongest in the country, due to high population growth. However, there had been a slowdown in auction clearance rates in these markets. Conditions remained challenging in Perth, where residential real estate prices continue to fall.
The board also noted housing credit growth had plateaued through early 2017. However, a rise in lending to owner-occupiers had counterbalanced slower growth in the real estate investment market.
When commenting on the cash rate decision, board members highlighted the strength in the global economy at the moment. This includes signs of improvement in investment and labour markets around the world.
The RBA noted several other central banks had become more positive about their own domestic economic conditions. Conditions in financial markets also suggest interest rate rises are on the cards in other markets.
June quarter data
The RBA noted that the available economic data for the June quarter was generally up, after a slight slowdown in the March quarter. According to the minutes, consumption was up for the June quarter. But the RBA is still worried about risks to future consumer spending, especially in light of subdued household income growth and against a backdrop of rising household debt.
The board noted it was too early for tighter lending rules designed to help address the risks associated with high and rising household debt to have had their full effect.
It did observe that there had been a recent improvement in labour market conditions, which had given the board more confidence about future wages growth. Improving construction figures also suggest infrastructure spending will help support future economic growth. In the housing market, a strong construction pipeline is also forecast to help the growth outlook.
The low interest rate environment remains an important variable in driving economic growth, a factor that has supported the residential construction boom.
The escalating Australian dollar is the most obvious risk to the local economy. The currency has been hovering around the US$0.80 mark, which puts pressure on exporters.
Taking the range of variables into account when making its decision about the cash rate, the board maintained its accommodative monetary policy stance and left the cash rate unchanged at a record low of 1.5 per cent.