The Reserve Bank of Australia (RBA) kept its trend-setting interest rate on hold Tuesday in a decision that was widely expected by markets.
RBA policymakers voted to hold the overnight rate at a record low of 1.5%, where it has stood since August 2016.
The central bank has been under the microscope as of late as residential property borrowing reached new record highs. Policymakers have kept interest rates at record lows for a year now, but have made repeated attempts to jawbone borrowers into scaling back their debt burdens.
Australia’s bill for home borrowing has reached a whopping $1.69 trillion, which is bigger than the country’s gross domestic product and nearly on par with superannuation savings, according to the latest RBA numbers.
Home values in the capital regions of Sydney and Melbourne have skyrocketed, with homeowners there enjoying double-digit annual returns.
The housing sector is forecast to remain robust for the foreseeable future, with first-time buyers expected to flood the market on new incentives due to be introduced shortly.
Underscoring fears of a housing correction is riding consumer debt levels. Policymakers once again acknowledged on Tuesday that “growth in household debt has been outpacing the slow growth in household incomes.”
The RBA will be happy to note that Australia’s largest trading partner continues to show signs of economic stability. Earlier in the day, Caixin China reported a better than expected rise in manufacturing output for July.
China’s gross domestic product (GDP) expanded 6.9% annually in the second quarter, outpacing forecasts fo 6.8%.
In December 2015, Australia and China entered into a new free trade deal in support of bilateral economic growth. The China-Australia Free Trade Agreement builds on existing strong ties between the two countries.