Welcome cooling in the housing market - RBA

Just wanted to share a couple of good summary pieces I’ve come across in the wash up of the RBA’s tightening of monetary policy last week.

Firstly this summary from Christopher Joye. He advises that “borrowers should be comfortable servicing rates 125-150 basis points higher than current levels as a conservative precaution.”

And secondly this report from Citi Bank which reviews RBA’s quarterly Statement on Monetary Policy (SMP). Some of the more interesting points are:

  • the RBA’s forecasts for inflation and GDP point to a slightly better combination of higher economic growth and lower inflation in the near term but the medium term forecasts are little changed.
  • What has changed from the previous SMP is the view on commodity prices. These are expected to remain at a higher level than assumed previously and the subsequent decline is expected to be more moderate. As a result, the terms of trade forecast is higher.
  • the RBA continues to believe in an orderly handover in the growth drivers from the public sector to the private sector