MELBOURNE/SYDNEY (Reuters) – Australia's central bank governor said on Wednesday the current slowdown in the housing industry isn't a cause for concern but flagged the advantages of policy to remain at record lows with the near future with wage growth and inflation still weak.
Home prices across Australia's major cities have fallen for successive months since late last year as tighter lending standards at banks cooled demand in Sydney and Melbourne – the two main biggest markets.
Housing credit growth has hit its slowest pace in six years, building approvals attended off an optimum and home prices posted their first annual drop since 2019 a few weeks ago.
However, Reserve Bank of Australia (RBA) Governor Philip Lowe said these complaints are usually not a cause for concern.
"We shouldn't fret although housing pricing is not rising with the rate they helpful to. And if they come down that's okay," Lowe said in Melbourne, answering a query right after a speech titled "Productivity, Wages and Prosperity".
"House prices in Sydney and Melbourne are 40 percent up from which we were looking at in 2019. You've got to have a longer-term perspective here."
The two cities comprise about Sixty percent of Australia's real estate market by value and 40 percent by variety of homes.
"The matter that provides me with some comfort is the fact that lending standards were strengthened a great deal over the past several years," Lowe added.
Policymakers have long focused on a debt-fueled binge within the property market that led prices to unsustainably high levels and took the country's household debt to income ratio to a record high 190 percent.
Indeed, the RBA is paying close attention to household finances and consumption growth which includes remained soft all the while the nation entered its 27th year of recession-free growth last quarter.
That debt pile put together with a snail-paced rise in wages has squeezed consumer spending, in-turn weighing on inflation.
Core inflation, a administered measure, has undershot the RBA's target for longer than 24 months now.
But the RBA is not wanting to ease rates further since it fears that would only push property prices higher.
The central bank last cut rates to.Fifty % in August 2019, making the present stretch of stable policy a long on record.
"At this time, a sustained pick-up in inflation to a number exceeding the midpoint on the target range probably will require faster wages growth than we’ve been currently experiencing," Lowe said in their speech.
"This increase will be only gradual," he added.
"Considering this, there isnrrrt a solid case for that near-term adjustment in monetary policy."
Lowe was still confident on the gradual pick-up in wage increases through the current 2 percent looking for effort is added together with some companies citing constraints discovering suitable workers.
"If the may be the case, there’s every chance that this next come in loan rates might be up, not down," Lowe said.