Regulatory measures imposed to curb lending growth were “helpful” in containing risks associated with record high household debt, but balance sheets “still warrant careful monitoring”, according to the Reserve Bank of Australia.
In minutes released from its February board meeting, the central bank noted that lending restrictions introduced by the Australian Prudential Regulation Authority (APRA) have helped alleviate concerns over household indebtedness.
“Tighter credit standards, as a result of supervisory measures implemented by the Australian Prudential Regulation Authority, had been helpful in containing the build-up of risk on household balance sheets and housing credit growth had eased, particularly for investors,” the RBA noted.
However, the central bank added that it would continue to observe household debt levels, which they said remain “elevated”.
“[H]ousehold debt levels remained elevated and members agreed that household balance sheets still warranted careful monitoring,” the minutes read.
The RBA also noted a decline in housing credit, which it believes is attributable to the slowdown in lending to investors, and also observed an increase in non-bank lending.
“Growth in housing credit had eased over the second half of 2017, driven largely by a slowing in lending to investors. Most of the slowing in housing credit growth had been accounted for by the major banks.”
However, members reportedly also noted that mortgage lending by non-banks had continued to grow strongly, although these lenders’ share of housing lending “remained small”.
Further, the RBA partly attributed “subdued” wage growth in the labour market to its decision to keep the cash rate at 1.5 per cent.
“Even though labour market conditions had improved noticeably over 2017, wage growth had remained subdued.
“Growth in the wage price index in the September quarter had been weaker than expected, and wage growth outcomes associated with new enterprise agreements had been lower than the percentage increases incorporated in agreements they were replacing.”
The RBA concluded: “Taking into account the available information, 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.”
[Related: RBA announces cash rate decision]
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