The Board of Directors of the Reserve Bank of Australia believes the economy is moving from recovery to expansion with more momentum than expected.
The minutes of his board meeting on June 1 indicate that this was the result of favorable health outcomes and substantial fiscal and monetary policy support.
“As uncertainty around the outlook had diminished, further surprises in both directions were plausible,” the minutes released Tuesday said.
“Health outcomes also continued to be a major source of uncertainty, although this was likely to decline as a greater proportion of the population is vaccinated. “
Despite this, the RBA is sticking to the line that interest rates will not rise until inflation is sustainably within its 2-3% inflation target, an event it says. does not expect to see it happen until early 2024 at the earliest.
Members continue to closely monitor developments in the housing market as prices continue to rise, credit growth is increasing – especially with first-time buyers – and investors have started to reappear in recent months.
“Given the environment of strong housing demand, rising house prices and low interest rates, members continued to stress the importance of maintaining lending standards and carefully monitoring loan trends. the loan “, indicates the minutes.
New figures from the Australian Bureau of Statistics show that the total value of Australia’s 10.6 million residential homes rose from just under $ 450 billion in the March quarter to $ 8.3 trillion.
This is the biggest increase on record.
Its Australian capital city residential property index rose 5.4% in the March quarter to be 7.5% higher for the year.
The Commonwealth Bank’s latest household spending intentions report showed an increase in planned spending on housing, education, health and fitness in May.
“With the strength of the labor market and the positive wealth effects of rising house prices, we expect consumer spending to support Australia’s economic growth in 2021,” said Belinda Allen, senior economist at the ‘ABC.
She said the rise in home buying intentions is no surprise given the strength in the housing market.
The ABC expects home prices to rise 14% during 2021 and 2022.
In its latest quarterly retail forecast report, Deloitte Access Economics expects retail spending to grow 5.9% in 2020/21, even after falling 0.5% between January and March of this year.
It will be the strongest growth in a decade.
However, after such a large increase, the forecast for 2021/22 is more modest growth of 0.9%.
“Spending options have been limited, and with many households with money to spend, consumers have flocked to retail,” said David Rumbens, Deloitte Access Economic Partner.
However, a shift in spending is underway.
“Australian consumers have more options for spending with the easing of restrictions and a need for social contacts to support dining and other activities at the expense of other retail spending,” Mr. Rumbens said .