RBA hints at rates hike next year

The West Australian - - NEWS - Shane Wright Eco­nomics Ed­i­tor

The Re­serve Bank may be pre­par­ing to sur­prise home own­ers with an in­ter­est rate rise next year as fig­ures sug­gest in­vestors and first-time buy­ers are get­ting out of key east coast prop­erty mar­kets.

In its quar­terly mon­e­tary pol­icy state­ment, the RBA up­graded its fore­casts for eco­nomic growth and in­fla­tion over the next 18 months. It be­lieves the job­less rate could slip be­low 5 per cent by early 2020.

The bank is also up­beat that wages will start to grow, although it will be “grad­ual”, in part be­cause tech­no­log­i­cal changes and the ab­sence of unions re­duc­ing the ne­go­ti­at­ing power of em­ploy­ees.

While ad­mit­ting there were risks around house­hold in­comes and the way more peo­ple were dip­ping into their sav­ings to keep up with spend­ing, the bank made it clear it be­lieves the next move in in­ter­est rates will be up.

“The board is ex­pect­ing fur­ther progress in re­duc­ing un­em­ploy­ment and en­sur­ing in­fla­tion is con­sis­tent with the tar­get,” it said. “If that progress is made, higher in­ter­est rates are likely to be ap­pro­pri­ate at some point.”

Mar­kets brought for­ward ex­pec­ta­tions of an in­ter­est rate rise that had not been ex­pected un­til mid-2020. The RBA’s up­beat fore­casts came out as the Aus­tralian Bu­reau of Statis­tics re­ported worse than ex­pected home loan fig­ures.

In Septem­ber, loans for the build­ing of new homes fell to the low­est level since May 2013 and are down 3.5 per cent over the past 12 months.

Loans for the pur­chase of new prop­er­ties and ex­ist­ing homes also slipped.

Of more con­cern was that while in­vestor loans con­tin­ued to fall, as they have since reg­u­la­tors tight­ened bank lend­ing stan­dards, there was also a fall across the board led by first­time buy­ers.

All of the falls were con­cen­trated on the east coast.

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