Australia keeps rates on hold, sizzling housing market a worry

[SYDNEY] Australia's central bank held rates steady for an eighth month on Tuesday, a widely expected decision, in the face of red hot housing markets in the biggest cities.

The Reserve Bank of Australia (RBA) kept rates at a record low of 1.5 per cent following easings in August and May last year. All 50 economists in a Reuters poll expected a steady outcome this week.

The RBA highlighted soft labour data as an area of concern, sending the Australian dollar lower by a quarter of a US cent. It was last down 0.3 per cent to US$0.7582 to stay near a three-week low.

A strong argument against any further stimulus has been soaring home prices, mainly in Sydney and Melbourne.

"Growth in household borrowing, largely to purchase housing, continues to outpace growth in household income," Governor Philip Lowe said. "By reinforcing strong lending standards, the recently announced supervisory measures should help address the risks associated with high and rising levels of indebtedness."

Australian regulators announced measures over the past week to restrain lending to speculative property investors in a bid to cool the sizzling market and tighten lending standards.

Mr Lowe also retained his concerns about record low wage growth and tepid inflation.

Data out this week showed retail sales unexpectedly fell in February, adding to growing evidence that debt-laden households were tightening their purse strings.

REUTERS