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RBA makes October rates call as property market comes under scrutiny

RBA governor Philip Lowe and an aerial view on an Australian suburb.
The RBA has left the cash rate on hold at a record low of 0.1 per cent (Source: Getty)

The Reserve Bank of Australia (RBA) has decided to leave interest rates on hold at a record low 0.1 per cent for October.

The RBA governor Philip Lowe noted that housing prices are continuing to rise around the country, leading to higher levels of household debt.

Lowe said the RBA has been in discussions around how rising levels of household debt could affect the economic stability of Australia.

He said record low-interest rates and Government schemes have encouraged more Australians to enter the housing market, but have taken on larger loans due to soaring prices.

“In this environment, it is important that lending standards are maintained and that loan serviceability buffers are appropriate,” Lowe said.

Additionally, Lowe maintained an optimistic outlook for the Australian economy saying he expects to return to pre-Delta levels in the first half of 2022.

“In our central scenario, the economy will be growing again in the December quarter and is expected to be back around its pre-Delta path in the second half of next year,” he said.

Aussie property market facing harsher regulation

This comes as Treasurer Josh Frydenberg plans to crackdown on growing levels of household debt which have come as a result of Australia’s soaring property market.

Frydenberg said he discussed issues surrounding Australia’s growing property market with the Council of Financial Regulators in September.

The Council comprises APRA, the Australian Securities and Investments Commission (ASIC), the Reserve Bank of Australia (RBA) and Treasury.

Prior to the Treasurer’s announcement, the RBA backflipped on its previous stance that rising property prices were not its concern.

RBA governor Philip Lowe had previously indicated that it was the duty of the Government to introduce measures to slow the heating market.

However, assistant governor Michele Bullock revealed that it was assessing "tools" that "could be employed in Australia" to manage the risks associated with house prices.

Australian property prices rose by 1.5 per cent over September, with the increase also marking the fastest annual pace since June 1989, new CoreLogic figures have revealed.

In 2021 alone, dwelling values rose by 17.6 per cent. Compared to 12 months ago, prices are 20.3 per cent higher.

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