RBA indicates easing bias

While the RBA board decided to leave the cash rate unchanged this month, they did indicate that further cuts could be on the cards.

“Members judged that the outlook for inflation may afford some scope for a further easing of monetary policy should that be appropriate to lend support to demand,” the minutes said.

“The board would continue to assess the outlook, and hence whether the current stance of policy would most effectively foster sustainable growth and inflation consistent with the target.”

The minutes noted that while questions remained over the quality of housing credit data disaggregated by the categories of investors and owner-occupiers, there were signs that lending for housing to investors had eased and lending to owner-occupiers had “picked up a little”.

“Significant reclassifications of loans to investors to loans to owner-occupiers in recent months, reversing some of the reclassifications earlier in the year, made determining the current rate of growth of the two categories difficult,” the minutes said.

“Most mid-sized housing lenders in Australia had increased their standard variable lending rates by 15–20 basis points in November, despite not being subject to the same capital increases on housing loans as the major banks.

“Overall, by the end of November, housing loan rates for owner-occupiers had risen to their levels around the middle of the year, while those for investors had risen by more, to be back to their levels at the beginning of the year.”

Members noted that strong competition in the banking sector meant that business lending rates had remained at historic lows for both small and large businesses.

The RBA noted that in the established housing market, auction clearance rates and housing price growth had declined over recent months in Sydney and to a lesser extent in Melbourne.

Prices were declining in Perth and rising moderately in much of the rest of the country, the minutes noted.

“Members observed that the growth of total housing credit had been little changed.

“The easing in housing price growth in Sydney and Melbourne and apparently lower growth in lending for the purpose of investor housing had followed an earlier tightening in lending terms, partly in response to supervisory measures announced by the Australian Prudential Regulation Authority.”

The board agreed that it was still too early to assess the effect of the ”modest increase in lenders' mortgage rates” in November (for both investors and owner-occupiers) on the housing market.

[Related: RBA rate cut expected by year end]