RBA's Lowe says balance needed in policy
Investing.com - The Reserve Bank of Australia wants a prudent balance between the helpful effect of low interest rates and unintended side effects like a surge in property values, Deputy Governor Philip Lowe said Monday.
Lowe made the remarks to a Corporate Finance Forum.
The RBA currently holds its cash rate at a record low 2.0%, with the last cut of 25 basis points in May.
"The further reduction in the cash rate earlier this month will provide a bit more support and it will help reinforce some of the recent encouraging signs - particularly in household spending. In time stronger consumption growth and a continuation of the pick up in residential construction should lead to a lift in business investment," Lowe said.
"A lift in non-mining investment remains the critical ingredient to stronger growth in the overall economy and to a successful transition," Lowe said.
But the RBA doesn't want to engineer a boom by encouraging people to borrow large amounts against future income because debt levels are already high, Lowe said.
"So there is a fairly fine line to tread here. The RBA's recent decisions have sought to strike a prudent balance - to help encourage consumption growth and thus business investment but avoid the type of imbalances that could cause problems later on," Lowe said.
"We will continue to assess that balance carefully."
Lowe made the remarks to a Corporate Finance Forum.
The RBA currently holds its cash rate at a record low 2.0%, with the last cut of 25 basis points in May.
"The further reduction in the cash rate earlier this month will provide a bit more support and it will help reinforce some of the recent encouraging signs - particularly in household spending. In time stronger consumption growth and a continuation of the pick up in residential construction should lead to a lift in business investment," Lowe said.
"A lift in non-mining investment remains the critical ingredient to stronger growth in the overall economy and to a successful transition," Lowe said.
But the RBA doesn't want to engineer a boom by encouraging people to borrow large amounts against future income because debt levels are already high, Lowe said.
"So there is a fairly fine line to tread here. The RBA's recent decisions have sought to strike a prudent balance - to help encourage consumption growth and thus business investment but avoid the type of imbalances that could cause problems later on," Lowe said.
"We will continue to assess that balance carefully."