RBA FINANCIAL STABILITY REVIEW TALKING POINTS
AUD/USD dropped as RBA indicated it's watching home prices and keeping broad liquidity criteria
RBA claimed rates at 0.10% as concern grows over if it can keep rates at 0% until 2024
Housing prices in Australia have risen dramatically over the last 12 months, compelling the RBA to track
The RBA indicated it is observing the rise closely, nevertheless"rising asset prices continue to be consistent with reduced interest rates" according to the bank.
The report highlighted new issues, namely excessive borrowing risk and a substantial increase in office property vacancies. The bank underscored a notable divergence in rental and sales costs, as falling retail demand seems set to drive vacancy rates higher and rents reduced. Meanwhile, strong demand from would-be buyers coupled with low interest rates seem set to propel housing costs even higher.
Furthermore, banks were described as with abundant liquidity and funding, together with the low-rate environment having a negligible effect on financial sustainability.
A powerful recovery coupled with unwavering confidence in the Federal Reserve's ability to support the American market has seen the Greenback recoup some of 2020's losses. Recent price action has witnessed bulls defend 0.7600, which may continue to become a critical point for short-term dealers.
Much of the recent focus in Australia has been on housing, given the meteoric rise in prices during the COVID-induced recession. Worries have become as many believe climbing yields pose a significant and serious headwind into Australia's housing market. RBA officials have been swift in their efforts to downplay any notion of a rate hike, saying that rates will likely stay where they are until 2024.
In March, Australian dwelling values recorded their largest growth rate in 32 decades, with home prices in Sydney leading the way. A number of the worries stem from the possibility of financial conditions tightening, which may cause highly leveraged and inflated resources to lose significant parts of their value.
In recent remarks, RBA Governor Philip Lowe has remarked that the RBA will monitor the tendency closely but cited strong demand from first-time buyers since the catalyst for the sharp increase in prices. Lowe continued to state"given the surroundings of rising housing prices and low interest rates, the bank will be monitoring trends in housing borrowing attentively and it is necessary that funding criteria are preserved."
