House prices have risen 15.6% nationally in the past year, says CoreLogic, with record levels of borrowing. But Lowe says there is a misconception the RBA will step in to subdue price rises by raising the official interest rate.
“It would be the wrong thing to do – and I don’t think it would work,” he says. “If borrowing is unsustainable, we will be talking to APRA about prudential tools, but we are not going to use monetary policy to deal with rising house prices.”
The RBA left the cash rate at a record low 0.1% at this month’s meeting and Lowe reiterated he does not expect a change until 2024. The bank wants inflation in the 2-3% target range before lifting the cash rate, which will require wage growth above 3% and a 4% jobless rate. Inflation is running at 1.1%, wage growth is 1.5% and the jobless rate is 5.1%.