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Free AccessREPEAT: MNI: RBA MonPol Intact Even If Mortgage Rise Prevalent
Repeats Story Initially Transmitted at 06:41 GMT Sep 4/02:41 EST Sep 4
By Sophia Rodrigues
SYDNEY (MNI) - The Reserve Bank of Australia isn't fretting about a
recently announced mortgage rate rise from a leading bank, or the possibility
that other banks may follow suit, MNI understands, as this would only reverse
declines seen in the past year and not result in any net tightening.
There is no question of the RBA considering a lower cash rate to offset the
increase in mortgage rates faced by households. Should mortgage rates rise above
levels seen last year, it still doesn't mean the RBA would bring rate cut to the
table.
Any decision to consider a cash rate lower than the current 1.5% will be
based on how far mortgage rates rise and whether it is impacting household
consumption, and through it the overall prospects for the economy.
--OFFSETS DECLINES
Westpac is, to date the only one of the big banks to announce a hike in its
variable mortgage rate, which came alongside increases for several other home
loan products. The other three big banks haven't yet announced similar moves,
although there is an expectation they might do so in coming weeks.
In the cash rate statement released Tuesday, the RBA acknowledged that some
lenders have increased mortgage rates by a small amount, but noted the average
mortgage rate paid remains lower than a year ago. All lenders would have to
raise mortgage rates by around 10-15 basis points to offset the declines in the
past year.
--FIRM ON GUIDANCE
Unlike some in the market,
the RBA doesn't think there have been any significant developments in the
past month to trigger a change its guidance that the next move in the cash rate
will be up. This means Governor Philip Lowe is likely to reiterate the guidance
when he speaks at the board dinner later Tuesday. The guidance is also likely to
be reiterated in the minutes from this board meeting on Sept 19.
The RBA remains of the view that the economy is progressing in line with
its forecasts laid down last month. In particular, the RBA highlighted that
growth in the first half of this year was likely above trend. Second quarter GDP
data is due to be published Wednesday.
The fall in the jobless rate to 5.3% recorded in the July labor force
survey has also increased the RBA's confidence that the labor market is tracking
at least in line, if not ahead, of its forecasts.
The RBA is unconcerned over the continuing softening in housing prices,
which it again noted in the cash rate statement, noting also that nationwide
measures of rent inflation remain low. Its view remains the same as expressed by
Governor Lowe in his opening statement at the Parliamentary testimony last
month.
"It's good news that this adjustment is taking place at a time when global
growth is strong, the Australian labour market is positive and interest rates
are low. All these things are helping with the adjustment in the housing
market," Lowe said then.
--DISMISSIVE ON POLITICS
The RBA is also unconcerned about the recent domestic political
developments, unless it affects business confidence and through that overall
activity in the economy. The Bank doesn't think Australia's recent political
upheavals, which saw a change in Prime Minister, affected the local exchange
rate in any meaningful way.
The depreciation of the Australian dollar was largely a result of rise in
the U.S. dollar, a trend also felt by most other currencies, the RBA said in
Tuesday's statement.
--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com
To read the full story
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Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.