The RBA just issued its Statement of Monetary Policy and the key points included an upgrade in expected economic growth and good news for our property markets.
The revised growth forecasts show GDP growth of 2.25%-3.25% for December 2014, rising to 3.00-4.00% by December 2015 and 3.00-4.50% by June 2016.
All very welcome news.
Meanwhile there were also changes to outlook for inflation, with underlying inflation creeping up towards the top of the target band by the end of this year, but perhaps remaining benign through 2015/16, with insufficient levels of employment to drive the CPI reading higher.
The RBA appears all set to keep interest rates at generational lows of 2.50% for the foreseeable future.
A few commentators raised an eyebrow at the RBA’s non-acknowledgement of housing affordability as an issue.
While the SOMP made numerous references to the housing sector, renovation activity and an uplift in construction, there didn’t appear to be any reference to any attempts to cool the established market.
RBA Housing market report
[sam id=40 codes=’true’]
For those who are really interested in the nitty gritty, the RBA went to the extra trouble this quarter of producing a special report on the state of the housing market here.
If you don’t have the time or inclination to read it – and who can blame you? – suffice to say that the language used to remarkably relaxed and assured (phrases like “broadly consistent..” featured prominently).
The basic theme is that housing markets are sensitive to interest rates, and the slightly delayed uplift in prices is broadly what might well have been expected in response to easier monetary policy.
No references to Self-Managed Super Funds, speculative activity or foreign capital are to be seen.
The RBA then wades through a raft of data to show that housing loan approvals are up, so are dwelling prices and building approvals, but debt levels appear to have essentially levelled out since 2006.
It will certainly be interesting to see whether the debt line of this chart starts to push on to new highs as it moves into 2014.
There may or may not be some kidology at play here, I’m not sure.
Perhaps the RBA doesn’t want to make reference to tightening monetary conditions for fear of sending the Aussie dollar back into the 90 cent range?
In any case, it’s wonderful to see steadily increasing growth forecast for the Aussie economy over the next few years, and the share markets have enjoyed that fact too.
Meanwhile, most capital city housing markets continue to tick higher.