Aussie dollar falls as RBA warns on housing market

  • Reserve Bank of Australia’s more worried tone about the nation’s housing market have given the Australian dollar a bit of a kicking today.
  •  The dollar was down 0.2 per cent at $0.7715 in early European trade, but had dropped by as much as 0.4 per cent after the minutes from the RBA’s March meeting warned of a “build-up of risks associated with the housing market”, given a surge in investment borrowing and still-strong price gains in markets like Sydney and Melbourne.
  • This is the first time in a while that we have seen the RBA refer to risks around the housing market in such an explicit manner.
  • The yield on 10-year Australian bonds which move inversely to price, was down 1.5 basis points to 2.808 per cent.

    Amid concerns that macroprudential measures introduced in 2015 are no longer working as effectively as they were last year, the federal government is expected to use its upcoming May budget to reveal a series of measures designed to boost affordability for actual home buyers and clamp down on those loading up on debt and buying multiple investment properties.

  •  Concerns about the housing market should eventually fade, but the dimming outlook for wage growth and inflation means the chances of future rate cuts are greater than markets anticipate.
  • Solid economic growth in the December quarter meant Australia has gone 25.5 years without a recession. And while naysayers have long (and wrong) said it will all end in tears, the country is just six months short of surpassing the Netherlands’ record for years of consecutive growth.
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