Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

RBA Sees Policy Helping Stem Aussie, Monitoring Home Borrowing

ForexApr 20, 2021 03:27
Saved. See Saved Items.
This article has already been saved in your Saved Items
2/2 © Bloomberg. A sign is displayed on a door at an entrance to the Reserve Bank of Australia (RBA) building, during a partial lockdown imposed due to the coronavirus, in Sydney, Australia, on Monday, May 18, 2020. Australia’s central bank decided against buying government bonds last week, the first time that’s happened since it began a quantative easing program in late March that sought to hold down three-year yields in order to lower interest rates across the economy. 2/2

The Reserve Bank of Australia said its policy settings were helping hold down the currency, while surging property prices meant it needed to monitor trends in home borrowing, according to minutes of its April meeting.

(Bloomberg) -- Easy policy “continued to support the economy by keeping financing costs very low, contributing to a lower exchange rate than otherwise,” the central bank said Tuesday in the minutes. “Members agreed that it would be important to watch carefully for increased risk-taking by lenders.”

Australia’s V-shaped recovery is reflected in the labor market, with hiring surging and unemployment falling even as the labor force swelled to a record last month. The economy faces a challenging few months ahead with the expiry of the government’s vast JobKeeper wage subsidy program, forcing firms and households to stand alone.

“While the overall recovery in the labor market was expected to pause in the period ahead, this was expected to be only temporary,” the RBA said. “It was likely that the full effect of the end of the JobKeeper program would become apparent over several months.”

Australia's jobless rate dropped to 5.6% in March as employment soared by more than 70,000, according to data released last week, after policy makers held their meeting.

The central bank said in the minutes that A$95 billion had been drawn from its lending facility that provides cheap funding to banks and a further A$95 billion was available until the end of June. The board said it would consider extending the facility if “there were a marked deterioration in funding and credit conditions.” There are no such signs currently, the bank said.

The RBA is currently tapping a second A$100 billion tranche of quantitative easing to help hold down the currency. Beyond this, the bank said it would undertake further bond purchases “if doing so assisted with progress towards the goals of full employment and inflation.”

It reiterated that a decision on whether to roll over yield curve control to the November 2024 three-year bond from the current April 2024 maturity would be made later in the year. Its decision would be guided by “the flow of economic data and the outlook for inflation and employment.”

Australia's hot housing market is likely to be increasingly central in RBA discussions, with house prices rising in March at the fastest pace since 1988.

“Given the environment of rising house prices and low interest rates, the bank would be monitoring trends in housing borrowing and the maintenance of lending standards carefully,” it said.

Yet Australians, like counterparts in much of the developed world, have solid financial buffers as people saved government cash payments during the height of the pandemic. The rapid recovery in the labor market is helping households meet their financial commitments.

The RBA noted survey data suggested income and savings increased for most household income groups, “with most of the additional saving undertaken by higher-income households.”

The RBA also provided some observations on the economy's performance in the first quarter:

  • GDP in the March quarter was likely to have recovered further to around its pre-pandemic level, earlier than previously expected; and
  • Growth in household consumption had moderated in the March quarter following strong growth in previous quarters

In a cross-country reference discussion, the RBA noted that despite Australia's rapid recovery in employment, wages growth had slowed to a greater extent “and had been more subdued than in other countries.” A key reason is Australia's labor market adjusted by reducing hours and restraining wages, whereas countries like the U.S. adjusted through a decline in employment.

The upshot is that the central bank's goal of wages growth sustainably above 3% to return inflation to target remains a high hurdle.

The RBA also noted in the minutes that the board would have a broader discussion on the implications of climate change for financial stability in coming months.

©2021 Bloomberg L.P.

RBA Sees Policy Helping Stem Aussie, Monitoring Home Borrowing

Related Articles

Dollar Edges Lower; Risk Sentiment Remains Fragile
Dollar Edges Lower; Risk Sentiment Remains Fragile By - May 19, 2022

By Peter Nurse - The U.S. dollar edged lower in early European trade Thursday, handing back some of the previous session’s substantial gains although the safe haven...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
Sign up with Email