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RBA signals cautious optimism

The Reserve Bank of Australia has expressed guarded optimism for the future of Australian property financing in the midst of the continued global tightening of credit availability.

In his speech on Friday to the Queensland division of the Property Council of Australia, the RBA's Deputy Governor Ric Battelino suggested that the home and commercial property finance markets show signs of life despite an overall slowing of credit growth.

Battelino stated that the Australian economy is growing around trend, while inflation remains within the RBA's target range. "This is a comfortable position to be in," Battelino said.

But in spite of the overall health of the economy, borrowers are still displaying caution, with credit growing at a moderate 7% over the past year and household savings on the rise. "All this is consistent with households taking a more cautious approach to their finances," Battelino said.

According to Battelino, most of the growth in credit since 2005 has been due to households borrowing for housing, while credit card debt, personal loans and margin loans have remained fairly flat.

Addressing the home loan market, Battelino indicated the weakening of other areas of borrowing is not cause for concern for the RBA given the relative health of housing lending. "The current picture is one where borrowing for housing is broadly growing in line with income, house prices are stable and there is little appetite for other forms of debt," he said. "From the Reserve Bank's perspective, this seems to be a satisfactory state of affairs."

By BN | 11 Oct 2010