While Australia’s housing market boomed without constraint over the last few months, partly due to record low-interest rates, the cash rate is unlikely to change in Tuesday’s monthly monetary board meeting.
Home loans for owner-occupiers rose by 0.6 percent in April and 6.2 percent over the last 12 months. Investor loans, which are much riskier in nature, also rose to its highest rate since December 2018, to a 1.1 percent annual increase.
The RBA and other financial regulators have repeatedly said they would keep a close eye on the housing market. However, they would unlikely step in specifically for the housing market.
It is likely that in the board meeting tomorrow, RBA Governor Philip Lowe will again reiterate this point while leaving the monetary policy unchanged.
The Australian National University (ANU) RBA Shadow Board holds, at 95 percent confidence, that maintaining the official interest rate at 0.1 percent is the appropriate call.
The Shadow Board said the latest lockdown in Victoria served as a “potent reminder” that COVID-19 can unexpectedly affect the economy at any time until a large portion of the population is vaccinated.
Henckel said the latest Federal Budget reflected the overall strength of the Australian economy, relative to the predictions made last year.
“However, further fiscal and monetary stimulus is needed for the foreseeable future, and so large budget deficits and low-interest rates are likely to persist for years,” he said.
The board also gave a 62 percent prediction that the cash rate will remain unchanged for another 12 months.
