Sydney property prices are given too much attention by the government
A plot of land is shown as sold in Sydney's newly-developed beachside suburb of Green Hills, February 2, 2015. The Reserve Bank of Australia (RBA), which held its first policy meeting of the year on Tuesday, announced a lowered official interest rate to 2.25%. Picture taken February 2, 2015. Reuters/Jason Reed

Governor Glenn Stevens from Reserve Bank of Australia, or RBA, said in a speech delivered during the American Australian Association function in New York that real estate property in Sydney is clearly booming but is given too much attention by the government. Although Stevens admitted a probability of having further cuts on interest rates, the escalating fears over the possibility of experiencing housing bubble may thwart breaking the “record of low interest rates.”

The bank’s governor revealed RBA is willing to reduce interest rates, if it were to mean aiding the government achieve sustainable growth on its economy. But he added that the question on whether said interest rates must be reduced has to be officially discussed. Prices of property in Sydney are already on double digits for two years with their third increase recorded in 2012.

Stevens divulged prices of property in other major cities remain to be “under control.” According to him, Tony Abott’s administration has been giving too much emphasis on the prices in Sydney but affords “too little attention to the more disparate trends among the other 80 percent of Australia.”

He opined it may easily be concluded that prices of Sydney properties may “look rather exuberant” and the Reserve Bank board cannot permit prosperity in Sydney property to domineer the board’s “consideration of ‘real economy.” Stevens shared there must be a balance “between the housing market and the rest of the economy.”

Credit Conditions Are Crucial

Credit conditions are, according to Stevens, one of the many factors affecting the interest rates, but he was quick to add that those credit conditions are not difficult to achieve. Stevens explained to the attendees the commitment they all committed to last year, during meetings on G20 in Australia, about attaining an increase by two percent the global GDP in five years, was not “about monetary policy” but other policies.

Steven reminded everyone this year will be an important time to determine whether they all are faithful to their commitments. In February, the Reserve Bank of Australia reduced cash rate to its latest record low of 2.25 percent, after speculations of rate cuts loomed.

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