House-Hold Debt
Minutes of the Monetary Policy Meeting of the Reserve Bank Board
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Considerations for Monetary Policy
In considering the stance of monetary policy, members noted that the improvement in global economic conditions had continued, particularly in China and the euro area. Demand growth from the Chinese industrial sector had been stronger than expected and had contributed to higher commodity prices. Labour markets had continued to tighten in a number of economies, but inflation had generally remained subdued. There had been a broadly based depreciation of the US dollar. Consistent with that, a number of currencies were close to their highs of the previous few years against the US dollar, including the euro and the Canadian dollar. The Australian dollar also had risen to levels last seen in 2015.
Domestically, the outlook was little changed. The forecast was for GDP growth to increase to around 3 per cent during the forecast period, supported by the low level of interest rates. Business conditions had improved further and faster growth in non-mining business investment was expected. Inflation was still expected to increase gradually as the economy strengthened. However, a further appreciation of the exchange rate would be expected to result in a slower pick-up in inflation and economic activity than currently forecast.
Employment growth had been stronger over recent months, so the forecasts for the labour market were starting from a stronger position. Forward-looking indicators suggested that the degree of spare capacity in the labour market would continue to decline gradually. Wage growth had remained low but was still expected to increase a little as conditions in the labour market improved. Members observed that recent strong employment growth would be likely to contribute to an increase in household disposable income, and therefore consumption growth, over the forecast period. However, ongoing low wage growth and the high level of debt on household balance sheets raised the possibility that consumption growth could be lower than forecast.
Members regarded conditions in the housing market and household balance sheets as continuing to warrant careful monitoring. Conditions in the housing market varied considerably around the country. While there were signs that conditions in the Sydney and Melbourne markets had eased somewhat, housing price growth in these two cities had remained relatively strong. In some other housing markets, prices had been declining. Borrowers investing in residential property had been facing higher interest rates and growth in credit to investors had eased, but overall housing credit growth had continued to outpace the relatively slow growth in household incomes.
Taking account of the available information and the need to balance the risks associated with high household debt in a low-inflation environment, the Board judged that holding the stance of monetary policy unchanged would be consistent with sustainable growth in the economy and achieving the inflation target over time.
(Source: Reserve Bank of Australia)
www.first2move.com.au
Considerations for Monetary Policy
In considering the stance of monetary policy, members noted that the improvement in global economic conditions had continued, particularly in China and the euro area. Demand growth from the Chinese industrial sector had been stronger than expected and had contributed to higher commodity prices. Labour markets had continued to tighten in a number of economies, but inflation had generally remained subdued. There had been a broadly based depreciation of the US dollar. Consistent with that, a number of currencies were close to their highs of the previous few years against the US dollar, including the euro and the Canadian dollar. The Australian dollar also had risen to levels last seen in 2015.
Domestically, the outlook was little changed. The forecast was for GDP growth to increase to around 3 per cent during the forecast period, supported by the low level of interest rates. Business conditions had improved further and faster growth in non-mining business investment was expected. Inflation was still expected to increase gradually as the economy strengthened. However, a further appreciation of the exchange rate would be expected to result in a slower pick-up in inflation and economic activity than currently forecast.
Employment growth had been stronger over recent months, so the forecasts for the labour market were starting from a stronger position. Forward-looking indicators suggested that the degree of spare capacity in the labour market would continue to decline gradually. Wage growth had remained low but was still expected to increase a little as conditions in the labour market improved. Members observed that recent strong employment growth would be likely to contribute to an increase in household disposable income, and therefore consumption growth, over the forecast period. However, ongoing low wage growth and the high level of debt on household balance sheets raised the possibility that consumption growth could be lower than forecast.
Members regarded conditions in the housing market and household balance sheets as continuing to warrant careful monitoring. Conditions in the housing market varied considerably around the country. While there were signs that conditions in the Sydney and Melbourne markets had eased somewhat, housing price growth in these two cities had remained relatively strong. In some other housing markets, prices had been declining. Borrowers investing in residential property had been facing higher interest rates and growth in credit to investors had eased, but overall housing credit growth had continued to outpace the relatively slow growth in household incomes.
Taking account of the available information and the need to balance the risks associated with high household debt in a low-inflation environment, the Board judged that holding the stance of monetary policy unchanged would be consistent with sustainable growth in the economy and achieving the inflation target over time.
(Source: Reserve Bank of Australia)
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