property boom

RBA shrugs off lockdowns as NZ central bank cracks down harder on property boom

PHOTO: New Zealand’s central bank says it is concerned about accelerating property prices (Unsplash: Kate Antamanova)

The Reserve Bank has left interest rates and its current stimulus plans unchanged, despite the extension of Greater Sydney’s COVID-19 lockdown until at least the end of the month.

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New Zealand has biggest house price increase in the WORLD

The cash rate target remains at 0.1 per cent and bond purchases will continue at $5 billion a week, until they are reduced to $4 billion a week in early September as was flagged at last month’s RBA board meeting.

In its board meeting on Tuesday, the RBA noted the recent outbreaks of the coronavirus were interrupting Australia’s economic recovery, and GDP was expected to decline in the September quarter.

But for now, it is sticking to its original plans to slowly taper the economy off monetary stimulus next month.

“The experience to date has been that once virus outbreaks are contained, the economy bounces back quickly,” RBA governor Philip Lowe noted in a sanguine post-meeting statement.

The normally bustling shopping strips at the heart of Sydney's CBD are all but deserted.
The normally bustling shopping strips at the heart of Sydney’s CBD are all but deserted.(ABC News: Stephanie Chalmers)

Reserve Bank ‘monitoring’ home loan trends

Dr Lowe said the outlook for the coming months was uncertain and depended on the evolution of the “health situation” and containment measures.

He said some increase in unemployment was expected in the near term due to the current lockdowns, but most of the adjustment in the labour market would probably take place through reduced hours worked and participation.

However, he said house prices had continued to strengthen, with increases in all major markets in Australia.

Housing credit growth had also picked up, with strong demand from owner-occupiers, including first-home buyers.

But there was no mention of any moves to curb property price rises.

Dr Lowe is still taking a wait-and-see approach.

“Given the environment of rising housing prices and low interest rates, the bank is monitoring trends in housing borrowing carefully and it is important that lending standards are maintained,” he said.

READ MORE VIA ABC

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