Source: Shane Wright | PerthNow
THE Reserve Bank hopes Australian house prices only grow in line with incomes for a “run of years” in a bid to bring down eye-watering household debt levels.
Bank governor Philip Lowe, giving evidence to a parliamentary committee this morning, said while the overall economic picture for the country was improving there was ongoing concern about debts held by many Australians.
Australian household debt is among the highest in the world, with RBA figures showing it at a record level.
Dr Lowe said there had been signs of “containment” in the build-up of risk in the housing sector.
This was due to tighter lending standards and a fall in the proportion of interest-only loans being issued by the nation’s banks.
But ultimately house prices stabilised for an extended period.
“While the Reserve Bank does not target housing prices or household debt, it would be a good outcome if we now experienced a run of years in which the rate of growth of housing costs and debt did not outstrip growth in our incomes in the way that they did over the past five years,” he said.
Dr Lowe said the bank still believed that wages – which are growing at their slowest rate on record – will eventually start lifting.
But he cautioned workers hoping for a happy surprise in their pay packet any time soon would be disappointed.
“Over time, we expect wage growth to pick up as the labour market strengthens further. The pick-up, though, is likely to be gradual,” he said.
Dr Lowe said if unemployment edged down and helped to push up inflation, the next move in interest rates would be up.
But any increase was likely to be some time away.
“The timing of any future move will depend upon the extent and pace of progress that we make in reducing the unemployment rate and having inflation return to target. As things currently stand, we expect that progress to be steady, but to be only gradual,” he said.
“Given this assessment, the Reserve Bank board does not see a strong case for a near-term adjustment of monetary policy.”