Reserve Bank assistant governor Malcolm Edey talks down risk of property bubble emerging in Australia

Posted on September 20, 2013 by | 0 Comments

By business reporter Pat McGrath
Updated Thu 19 Sep 2013, 12:17am AEST

The Reserve Bank has cautioned against “unrealistic alarmism” about a possible property bubble in Australia, a day after it offered a muted warning to banks about prudent lending standards.

RBA assistant governor Malcolm Edey has told a conference in Sydney that the central bank is keeping a close watch on house prices, which he said were growing at an above-average pace.

However Mr Edey believes it is wrong to call the rise a bubble.

“We shouldn’t be rushing to reach for the bubble terminology every time the rate in house price increases is higher than average, because by definition that’s 50 per cent of the time,” he said.

“And you’re just going to be unrealistically alarmist by making that call every time that happens.”

In the minutes of its September monetary policy meeting made public on Tuesday, the RBA board warned about the risks of low interest rates.

“In the current environment of low interest rates and slow credit growth, members agreed that it was especially important that banks maintained prudent lending standards,” the minutes said.

At the meeting, the board decided to keep the official cash rate unchanged at the historic low of 2.5 per cent.

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