Slowing housing markets combined with tightened lending will continue to weigh on the economy going into 2019, the Reserve Bank of Australia (RBA) has warned.
In its meeting minutes released on Tuesday, the RBA expressed its concerns on price declines in established markets.
“Lending to investors had remained very weak and growth in lending to owner-occupiers had continued to ease, to be 5–6 per cent in annualised terms,” the RBA said.
“The slowing in housing credit growth had been almost entirely accounted for by the major banks, where the rate of growth in lending had been the slowest in many years.”
The financial services royal commission “was likely to have reduced some lenders’ appetite for lending to both households and small businesses”, it concluded.
While Australia’s central bank believes the unemployment rate will continue to shrink, and despite a 2.3 uptick in wage growth in 2018, it expressed concern over earnings.
“Average earnings had increased at roughly the same rate as consumer prices over the previous five years or so, leaving real average earnings relatively unchanged despite moderate productivity growth.”
The last RBA monetary policy meeting on 4 December happened before the latest round of GDP data came in worse than expected, leading at least one economist to revise their interest rate forecast down.
AMP chief economist Shane Oliver said there was plenty of global uncertainty acknowledged by the central bank that would help lead it to rate cutting next year.
“If you read the minutes, there’s a bit more concern about slowing Chinese growth, a bit more concern about what’s going on in credit markets globally,” Oliver told Trading Day.
While Oliver believes the RBA will wait to see what fiscal stimulus is announced in the federal budget in April, the tax cuts alluded to during MYEFO may not be enough.
“If you’re talking about $3 billion worth, or $6 a week, that’s not a huge boost,” he said.
“My view is that the next move in rates will be down.”