Too Much Sydney Housing Talk: RBA

The head of the Reserve Bank says the booming Sydney property market gets far too much attention, and further interest rate cuts are possible.

 Reserve Bank Head says further interest rate cuts are possible

Reserve Bank Head says further interest rate cuts are possible

Two years of double digit home price growth in Sydney have heightened fears of a property bubble, which may prove a deterrent to cutting record low interest rates.

But Reserve Bank governor Glenn Stevens says too much attention is given to Sydney, while prices in other capital cities remain under control.

"Popular commentary is, in my opinion, too focused on Sydney prices and pays too little attention to the more disparate trends among the other 80 per cent of Australia," he told a function in New York.

Rates are only one factor driving house price rises, and they need to be balanced against other financial considerations, he said.

That has been behind the RBA's decision to maintain the cash rate at record lows since August 2013, and its willingness to cut again if necessary, Mr Stevens said.

"The board has, moreover, clearly signalled a willingness to lower it even further, should that be helpful in securing sustainable economic growth."

But other policies, including spending by the federal government, also need to contribute to economic growth, he said.

"Any help in boosting sustainable growth from other policies would, of course, be welcome," Mr Stevens said, just weeks before Treasurer Joe Hockey delivers his second budget.

"In particular, things that could credibly be seen as lifting prospects for future income, and increasing confidence in those prospects, would give easy monetary policy a good deal more traction."

The RBA boss also said he expects the Australian dollar to fall further, despite its recent hold roughly between US78c and US76c.

"The Australian dollar has declined and will very likely fall further yet, over time," Mr Stevens said.

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Source: Business Spectator