RBA: Sydney housing market will not deter rate cuts

by Julia Corderoy17 Jun 2015
The Sydney housing boom won’t be enough to deter the Reserve Bank from further interest rates cuts, the minutes from the most recent Reserve Bank board meeting suggests.

Despite this week’s comments from the assistant governor of the Reserve Bank Christopher Kent that Sydney house prices are expected to continue rising due to an “unusually low” level of land supply, the minutes of the RBA’s June board meeting suggest that Sydney’s heated housing market will not determine future rate decisions.

“Members noted that conditions in the established housing market had continued to vary across the country,” the minuted noted.

“Although housing price inflation had remained high in Sydney and, to a lesser extent, in Melbourne over recent months, there had been some divergence in price developments for different segments of these markets; price inflation of detached houses had increased, whereas price inflation for units had eased in both cities.

“Noting that housing price growth in other cities and regional areas had declined over recent months, members discussed the strength and composition of underlying supply and demand conditions in different parts of the housing market.”

While the board decided to leave the cash rate untouched at 2%, to assess how the May rate cut filtered through the economy, the minutes reveal that the Reserve Bank still maintains an easing bias.

“Overall, in assessing domestic conditions and the international environment, the Board's assessment was that the stance of monetary policy should be accommodative.

“Having eased policy at the previous meeting, members judged that it was appropriate to leave the cash rate unchanged and to assess information on economic and financial conditions as it became available. 

“These data would inform the Board's assessment of the state of the economy and the outlook and hence whether the current stance of policy would most effectively foster sustainable growth and inflation consistent with the target.”