Daily Commentary BY THE CURVE TEAM –

RBA Signals on Housing

7th of April, 2021

A mostly innocuous statement on monetary policy contained a signal on their view on house prices.

There was no change to the current settings. The Term Funding Facility will almost certainly lapse at the end of June.

That will leave the 3-year Yield target as the next lever the RBA will unwind, followed by Quantitative Easing and finally the cash rate. With such accommodative settings and the economy roaring back to life there are growing concerns that house prices will run hot.

The last two months especially has seen significant gains, with prices up 2.8% and 2% over March and February respectively. This has led to the RBA saying today that they ‘will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained’.

Speculation is already rife that Australia will turn to macro-prudential tools to rein in prices rather than pre-emptively tighten monetary policy. Already countries such as New Zealand and Canada have taken significant steps to rein in prices, which admittedly have grown at a much faster clip than Australia.

More encouraging economic data came today with ANZ job ads up strongly again over March. They were up 7.4% in March following an 8.8% rise in February.

It leaves them 23% higher than pre-covid levels in an environment where there are currently more people employed than pre covid. This bodes well for employment post the end of JobKeeper.

Josh Stewart

Associate - Money Markets