The Reserve Bank of Australia (RBA) surprised no one with the conclusion of its March monetary policy meeting, leaving the cash rate unchanged a 1.50% while conveying a cautiously optimistic tone throughout its policy statement.
As was the case in February, it was not enough to see the board drop its neutral policy bias, something that suggests that rates are going nowhere for a long time.
“Taking account of the available information the Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time,” it said.
There was always going to be interest in the bank’s view on housing, given renewed focus on the residential property market, particularly strength in Sydney and Melbourne. However, it was a familiar view communicated by the board.
“Conditions in the housing market vary considerably around the country.” it said. “In some markets, conditions are strong and prices are rising briskly. In other markets, prices are declining.”
The RBA said that borrowing by investors “has picked up over recent months”, a small change from February where it said that borrowing for housing had “picked up a little, with stronger demand by investors”.
The bank also suggested that “supervisory measures have contributed to some strengthening of lending standards”.
That’s a somewhat watered down view to that communicated previously when it said that “with leverage increasing, supervisory measures have strengthened lending standards and some lenders are taking a more cautious attitude to lending in certain segments”.
It’s a notable tweak, given the debate over the role of investor activity in the marketplace right now. But then again, it’s not an outright warning.
Outside of housing, the bank also reflected on the rebound in economic growth recorded in the December quarter last year.
“The Australian economy is continuing its transition following the end of the mining investment boom, expanding by around 2.5% in 2016,” it said.
“Exports have risen strongly and non-mining business investment has risen over the past year,” adding the “improvement in the global economy has contributed to higher commodity prices, which are providing a boost to Australia’s national income”.
It also noted the pickup in household consumption in last week’s GDP report, acknowledging that it “was stronger towards the end of the year, although growth in household income remains low.”
It also said that “most measures of business and consumer confidence are at, or above, average”.
And it expects that economic outlook will continue to be supported by the low level of interest rates, although it once again hinted that the benefit from previous declines in the Australian dollar may be now starting to fade.
“The depreciation of the exchange rate since 2013 has also assisted the economy in its transition following the mining investment boom,” it said. “An appreciating exchange rate would complicate this adjustment.”
It’s language on the inflation outlook and labour market conditions was also largely unchanged, although it did say that employment growth had been “concentrated” in part-time jobs over the past year. Previously it had said that “growth in full-time employment turned positive late in 2016”.
On the international front, the bank said that “conditions in the global economy have continued to improve over recent months”, adding the word continued into the March statement.
Like many others, it also touched upon the shift in US rate hike expectations seen over the past week.
“Interest rates are expected to increase further in the United States,” it said, a change from February where it said that rates had increased.
Given the similarities between the March and February statements, there is really nothing major to garner from today’s release.
The RBA is comfortably on hold, and waiting upon further information.
However, its slightly firmer commentary on the housing market suggests, at the margin, that tighter macro-prudential restrictions may arrive in the months ahead should housing conditions in Sydney and Melbourne not begin to cool.
The full March policy statement can be accessed here.
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