RBA on the "narrow and cautious" monitoring of household debt

The Reserve Bank of Australia held a special discussion on the high indebtedness of Australian households at this month's meeting, concluding that "household balance sheets continue to deserve careful and attentive follow-up."

Based on a document prepared for the meeting, reveals the minutes of the decision on July rates, released Tuesday.

"Two key factors in this trend in countries have been the decline in nominal interest rates." The Reserve Bank noted that the Australian housing market is unique in that most of the housing is owned by the government. household sector, which has contributed to increased borrowing for housing

In other countries, the business sector tends to have a higher proportion of rental properties, according to the minutes. The preference for the choice of individual properties in large cities has also led to an increase in the cost of housing.

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"High Household Debt Levels Could Affect Economic Outcomes", Making Indebted Households More Vulnerable to Economic Shocks, and Disposable Income Paying for Variations in Mortgage Rates. ;interest.

The Reserve Bank explained how short-term financing costs had increased in Australia, attributing this to US developments and other factors.

Pressures on financing costs have intensified, forcing lenders out of the big four banks to recover A general decline in deposit growth, widening the national funding gap, highlights a major weakness in Australian financial system, namely its dependence on unstable financial markets to bridge the gap between loans and savings.

The gap has widened to $ 457 billion in the first quarter of 2018, resulting in a need for additional funding of $ 60 to $ 70 billion, according to National Australia. The Bank's Analysis

"The money market rates in Australia also aligned with those of the international markets at the beginning of the year, but in the weeks leading up to the meeting they rose independently of other markets ". 19659002] "This corresponded to the recent upward trend in financial pressures at the end of each calendar quarter," but the Reserve Bank board is unclear about the persistence of these pressures.

The financing costs of the big banks rose just over 2018, they remained low compared to history.

The HSBC chief economist in Australia, Paul Bloxham, also finds that broad money growth has slowed sharply from 2.5% in May to "Broad money growth is also fell short of credit growth, the widest gap in more than a decade, "writes Mr. Bloxham in a report released Tuesday.

The slowdown in mone growth has its roots in the resurrection of investment, financed by a reduction in corporate deposits.

"If effective rates rise, the risk is that the RBA can offset the effect – probably by waiting for even longer.", Concluded Mr. Bloxham

Economists have revised their expectations around interest rates to the point where the median economist interviewed by The Australian Financial Review now sees the Reserve Bank rise in the second half of 2019, pushing back their forecasts for the first half [19659002] Minutes of the June meeting seem to state that the Reserve Bank thinks in more conciliatory terms.

Last month, the minutes contained no reference to "members that it was more likely that the next move in the cash rate would be up, rather than down, "which was present in the record of the meetings of April and May.

That being, a speech by Dr. Lowe on the 13th June inc Read the line "It is likely that the next move in interest rates will be up and not down. "

At the July meeting, this reference returned:" Members continued to agree that the next move in the money rate would more likely be an increase than a decrease, "the minutes read.