RBA chief Philip Lowe’s ‘worry’ for young home buyers

The RBA’s new boss is a “bit more comfortable” about home prices but, as a father, feels the problem personally.

RBA boss Philip Lowe is now more “comfortable” about the house price boom. Pic: AAP

Reserve Bank governor Philip Lowe has used his first public comments as the head of Australia’s central bank to express “worry” about the ability of young people to get a foothold in the housing market.

The stunning rise in Australian house prices over the past two decades has caused many millennials to give up on the prospect of buying a house, with Dr Lowe saying the issue personally affected him.

“As a father of three children I worry … because people are paying so much for housing,” he told the House of Representatives Standing Committee on Economics.

The newly-appointed governor, who assumed the role on Sunday follow the retirement of Glenn Stevens, said the key issues behind high house prices relative to incomes were a lack of supply and transportation networks that failed to encourage purchases in outer suburbs.

“We can do something about that through zoning and transportation,” he said.

“We haven’t invested enough in transport.”

Dr Lowe defended the central bank against claims record low interest rates had spurred house prices to remarkable levels, saying the impact of monetary policy had been modest against the other issues at the heart of the price rises.

The RBA has struck a more confident tone on fading housing bubble risks this year, with talk of a cooling off in activity across recent months.

“The current cyclical position is better than it was a year ago,” Dr Lowe said in a Q & A session following a prepared speech.

“I’m a bit more comfortable about that.”

Earlier, the new RBA governor reiterated Mr Stevens’ assertions the housing market had slowed from the boom-like conditions of 2015.

“The rate at which established housing prices are increasing has moderated, although there remain some pockets where prices are increasing briskly,” Dr Lowe said.

“Credit growth and turnover in the housing market are also lower than they were a year ago. Under APRA’s guidance, lending standards have also been tightened. Overall, then, the situation is somewhat more comfortable than it was a year ago, although we continue to watch things carefully.”

In a wideranging update on the economy, Dr Lowe also hinted the RBA would not be concerned by a period of undershooting the 2-3 per cent medium-term inflation target, asserting the central bank was not full of “inflation nutters”.

Rate cuts were left on the table, however, with mixed messages on policy bias throughout the speech and consequent Q & A session.

“That’s possible, it going to depend on a whole range of factors,” Dr Lowe told the House of Representatives economics committee on Thursday. These include what happens overseas, the next Australian inflation data, and how the labour market and housing markets are performing.

“Certainly there are scenarios where rates would fall again, there are scenarios where they wouldn’t need to fall again,” he said.

The Australian dollar was choppy through Dr Lowe’s testimony, edging down US0.05c to US76.3c at 1.15pm (AEST) after the local unit surged US0.7c overnight.