RBA focuses on housing and jobs amid improvements in both markets

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 Reserve Bank of Australia (RBA)
Business people walk outside the Reserve Bank of Australia (RBA) in Sydney May 5, 2015. Reuters/Jason Reed

Reserve Bank of Australia remained focused on housing markets and employment at its June monetary policy meeting. Signs of improvements surfaced from both.

There were signs that price pressures were starting to ease even while property had been "rising briskly" in Sydney and Melbourne, Australia’s central bank declared on Tuesday. Interest rates were kept at 1.5 percent.

The bank also stressed that growth in housing debt outpaced rise in household incomes. The RBA also noted measures intended to cool lending "were yet to have their full effect.”

The minutes of the latest board meeting also said that indicators pointed to further jobs growth ahead. There are also signs of "a gradual erosion" of spare capacity in the labour market. It recognised employment gains strengthened in the past months. However, growth in hours worked had dropped.

The RBA also discussed wage growth, pointing out that it remained low and is likely to remain the case “for some time yet.” "Low growth in incomes, along with high levels of household debt, appeared to have been restraining growth in household consumption,” it said, according to Bloomberg.

Philip Lowe, RBA governor, reiterated the importance of ensuring financial stability while record-low cash rate drives up borrowing and asset prices. The central bank said economic growth will accelerate over the next years to above 3 percent per year.

Chief Australia and New Zealand economist at Capital Economics Paul Dales said the RBA is becoming more concerned about the outlook for consumption. He added that as it did not get too depressed by the surge in unemployment rate in the early months of 2017, it will not get too excited by an anticipated drop.

The RBA maintained that the government's May budget will not have a tremendous effect on its near-term outlook for the Aussie economy. Proposed infrastructure spending is expected to occur after 2019. The minutes also revealed the central bank's liaison identified some commercial property projects that are under consideration.

ANZ Research said it continues to see RBA on hold for the foreseeable future. Meanwhile, CommSec chief economist Craig James noted the central bank has not given hints there will be changes to interest rates any time soon.

"Board members considered all manner of factors at the June meeting although it is clear that the housing and job markets are being watched carefully," James said. He noted that since the meeting, data indicated softer home prices and stronger job markets.

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