SYDNEY: Australia's central bank held interest rates at a record low for an 11th straight month on Tuesday and sounded ready to keep them there for a lot longer even as pressure mounts for a hike to cool a red-hot housing market.
The Reserve Bank of Australia (RBA) concluded its October policy meeting with cash rates at 0.1% and its bond buying programme unchanged at A$4 billion ($2.92 billion) a week.
It was an outcome expected by all 36 analysts polled by Reuters as the bank has long argued that no rise was likely until 2024 given weakness in wages and inflation.
The need for continued stimulus has been underlined by coronavirus lockdowns in Sydney, Melbourne and Canberra which were certain to cause a painful contraction in economic growth in the September quarter.
The RBA is counting on a quick recovery now that vaccination rates are high enough for restrictions to soon be eased, with almost 80% of the adult population having received at least one dose.
New South Wales is set to relax stay-at-home rules from next week, with Victoria following later in October.
"As vaccination rates increase further and restrictions are eased, the economy is expected to bounce back," RBA Governor Philip Lowe said in a statement.
"The Bank's business liaison and data on job vacancies suggest that many firms are seeking to hire workers ahead of the expected reopening in October and November."
Yet the prospect of rates staying so low for years ahead has also inflated a bubble in house prices, leading to much angst about affordability and debt.
The RBA has dismissed calls to use rates to curb the market, arguing it would only harm the broader economy and macro-prudential rules were the better tool.
Regulators last week signalled proposals on home lending would be released in the next couple of months and analysts expect a focus on income to debt ratios and loan valuations.
In particular, analysts suspect they could limit the share of bank loans where the debt is six or more times the borrower's income.
"Regulators are starting to become concerned about the medium-term risks to the economy should credit growth continue to materially outpace growth in household income," said NAB economist Tapas Strickland.
"A tightening in macro-prudential policy is likely to have knock-on impacts to house price growth."
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