RBA Governor Lowe speaks soon
- Topic is Household Debt, Housing Prices and Resilience
- Due at 0310GMT (1.10pm local time in Sydney)
Seemingly more so than his predecessor Glenn Stevens the current governor is concerned with high debt loads impacting negatively on household spending. He raised this in February and its been an increasingly recurring theme from him and the bank ever since.
CBA previewed Lowe's speech earlier in the week:
- Governor Lowe's speech on Thursday will emphasise why there is little chance of a further rate cut short of some economic catastrophe
- Lowe is concerned about the high levels of household debt, overly rapid growth in house prices and the potential threat to the economy and financial system - does not want to cut interest rates
- There is some risk of the message being diluted a little
Price growth in some of the "hot" parts of the housing market did slow in April
But getting a clear read is difficult with Easter having some impact
Leading indicators such as auction clearance rates are yet to fall to levels consistent with a permanent loss of price momentum - The RBA has always placed a great deal of importance on financial stability. And Governor Lowe does appear to have elevated this importance during his tenure. But we suspect his current concerns are more to do with macroeconomic risks. The RBA's recent Financial Stability Review concluded that Australian banks remain well placed to manage the various challenges they face. The issue is more to do with how high debt levels and the overweight share of housing investor activity can amplify the effects of any "shock° on the business cycle.
