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Australia's central bank disputes role in surging house prices


Xinhua
15 Sep 2021

SYDNEY, Sept. 15 (Xinhua) -- Governor of the Reserve Bank of Australia (RBA) Philip Lowe on Wednesday deflected suggestions that the bank's monetary policy is behind Australia's out-of-control house prices.

During a speech addressing the impact of COVID-19 on Australia's economy, Lowe conveyed the bank's central message that the Delta outbreak has "delayed - but not derailed - the recovery of the Australian economy."

He also addressed concerns raised around house prices solidified in data released by the Australian Bureau of Statistics (ABS) on Tuesday.

The ABS report showed that the mean price of houses across the nation rose nearly 150,000 Australian dollars (about 110,000 U.S. dollars) from June 2020 to June 2021, bringing the average house price in Australia to a record 835,700 Australian dollars (about 610,000 U.S. dollars).

This surge has been led by Australia's most populous city, Sydney and capital city Canberra, which both saw an increase of over 8 percent over the 3-month period to June, and nearly 20 percent over the year.

Lowe rejected calls that raising the national cash rate would be an effective way of cooling Australia's overheated housing market.

"While it is true that higher interest rates would, all else equal, see lower housing prices, they would also mean fewer jobs and lower wages growth," said Lowe.

"This is a poor trade-off in the current circumstances."

While he conceded that increased lending fuelled by low interest rates have been a contributor to rising house prices, he maintained that increasing interest rates would not be the right way to address these "concerns".

"The way to address these concerns is through the structural factors that influence the value of the land upon which our dwellings are built," said Lowe.

The factors suggested by Lowe included the implementation of taxes, housing planning and zoning restrictions, the types of houses being built, and Australia's transportation networks.

The RBA has previously confirmed that interest rates would not lift from its rock bottom 0.1 percent rate until at least 2024.

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