RBA hints at rates hike next year
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.