RBA: We are not responsible for house prices

author-avatar By
on February 05, 2021
RBA: We are not responsible for house prices

Australia's central bank has refused to intervene in rising house prices.

In a speech to the House of Representatives Standing Committee on Economics, Reserve Bank (RBA) Governor Philip Lowe said controlling house prices was not one of its responsibilities.

"Housing prices are now rising across most of the country. Even so, the national housing price index is only around the level reached four years ago," Dr Lowe said.

"As we have previously discussed at these hearings, the RBA does not – and should not – target housing prices.

"Instead our focus is on the lending that is used to purchase housing." 

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Lender

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
NSW/VIC/SA METRO & INNER REGIONAL AREAS$5000 CASHBACK. T&Cs APPLY.
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
NSW/VIC/SA METRO & INNER REGIONAL AREAS$5000 CASHBACK. T&Cs APPLY.

Variable Home Loan (Principal and Interest)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of May 25, 2022. View disclaimer.

House prices rose for the fourth consecutive month in January, surpassing pre-COVID levels by 1.0% and sitting 0.7% higher than the 2017 peak, according to CoreLogic. 

Dr Lowe said had the housing market crashed last year like many forecasted, any economic recovery would have been far more difficult. 

"There are many moving parts here at present: record low interest rates; a shift in preferences towards houses and regional locations; large government incentives for first home buyers; the slowest population growth in a century; very high rates of house building; and a decline in apartment rents in Sydney and Melbourne," he said. 

"In the face of all these moving parts, the housing market has been more resilient than expected and this has been helpful in terms of the overall economy." 

In the RBA's Statement on Monetary Policy, the central bank updated its economic outlook for the coming years as a result of the better than expected recovery. 

In its central forecast, unemployment will continue to trend downwards, dropping to 6% by the end of this year and 5.25% by mid 2023. 

However, the end of JobKeeper will see further job losses this year. 

"But, over time, these are expected to be offset by the jobs created by the ongoing economic recovery," Dr Lowe said.

"Job vacancies, job ads and business hiring intentions have all rebounded sharply, which suggests continuing solid employment growth over the next few months." 

In the downside scenario, unemployment will remain steady for most of 2021 and will decline only gradually after due to large COVID outbreaks. 

In a more optimistic upside scenario, positive health outcomes, faster easing of restrictions, and boosted spending and confidence would see unemployment fall below 5% by the end of next year.

Meanwhile, inflation isn't expected to climb into the RBA's target range of 2-3% before 2024, meaning it will never have sat in that band for the entirety of Dr Lowe's tenure, from 2016 to September 2023. 

Wage growth is set to be a similar story, sitting below 2% for the next two years, even slower than the low rates recorded prior to the pandemic. 

Bitcoin "not really money" 

For the cryptocurrency geeks, read on: The RBA's assistant governor Michelle Bullock gave it a not-so-glowing shoutout. 

“I think there is a lot of fuss over bitcoin and it’s not a payment instrument and it’s not even really money,” Ms Bullock said.

“I think there is a lot of fuss about it as a potential asset." 

Whether crypto is really money is debatable to some, but its volatility is not. 

Off the back of meme traders, cryptocurrency 'Dogecoin' is up 380% in the past month and 696% this year. 

It started off as a joke, and has since skyrocketed thanks to some pesky  reddit-traders, even getting a shoutout from Elon Musk. 


Photo by Alex Eckermann on Unsplash

Latest Articles

author-avatar
Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

Collections:

Be Savings smart.
Subscribe for free money newsletters.

By subscribing you agree
to the Savings Privacy Policy