Noting yesterday’s statement “The main domestic uncertainty continues to be the strength of household consumption in the context of weak growth in household income and falling housing prices in some cities.”
Today, RBA governor Lowe is speaking on the very hot topic of “The Housing Market and the Economy” in Sydney.
- Lowe says has the flexibility to adjust MP in either direction due to plausible scenarios where rates can go up or down and possibilities arrear to be reasonable evenly balanced.
Headlines via Reuters
- Says has flexibility to adjust monetary policy in either direction.
- Plausible scenarios where rates go up and where rates go down.
- At moment, the probabilities appear "reasonably evenly balanced".
- Labour market is key issue, recent data have been encouraging.
- Other economic indicators "paint a softer picture".
- GDP growth in second half of 2018 was clearly less than in first half.
- Growing tension between strong labour market data and softer GDP data.
More headlines coming through:
- Adjustment in housing market is manageable for overall economy.
- Less than 5% of indebted owner-occupier households have negative equity.
- Liaison showed some lenders became more cautious last year.
- Credit conditions tightened more than was probably required.
- Important that banks are prepared to take credit risk.
- tightening in credit supply contributed to slowdown in credit growth.
- But main story is one of reduced demand for credit, rather than reduced supply.
- Wealth effects influencing consumption, but mainly through income expectations.
- This means developments in labour market particularly important.
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