Daily Commentary BY THE CURVE TEAM –

Housing Approvals Continue To Show Strength

13th of October, 2017

A couple of interesting releases and comments domestically overnight caught our attention. Housing finance numbers came in above expectations while we heard some interesting commentary around inflationary expectations from a major bank.

Following July’s pull back in investor lending, the value of housing finance commitments rose 4.3% in August. The result does not seem to reflect the tighter regulatory environment imposed by APRA earlier this year, whereby rates on interest only and investor loans were lifted. The RBA will be watching carefully as it appears we are still waiting for the measures to have more of a material impact to bring credit growth back in line with income growth.

That being said, the annual pace of investor lending growth has fallen from 14% to 6.5%.

As we have mentioned time and time again, one of the other concerns for the RBA remains the lack of inflation growth. NAB Consumer inflation expectations data released yesterday indicated that consumers are expecting that rising utilities costs will be enough to lift inflation back within the RBA’s target band.

Nevertheless, conditions at the moment imply that inflation is in no rush to push higher, especially with the lack of wage pressures. A lack of wage growth remains one of the key issues the Australian economy, particularly combined with subdued consumption levels. This will continue to urge a more patient approach to removing accommodative monetary policy settings by the RBA.

Highlight today will be the RBA’s Financial Stability Review, while across the Pacific we are due US CPI data which will garner a lot of attention from markets.

Oliver Parsons

Client Relationship Manager