Australia is 'prepared to do more' to slow housing, RBA says

[SYDNEY] Australian regulators could further restrict mortgage lending as the impact of measures taken more than two years ago begins to wane, central bank Assistant Governor Michele Bullock said.

"There is no doubt that the actions did address some of the risks," Ms Bullock said in the Bloomberg Address in Sydney.

"While the resilience of both borrowers and lenders has no doubt improved, the initial effects on credit and some other indicators we use to assess risk may fade over time. We are continuing to monitor their ongoing effects and are prepared to do more if needed."

Ms Bullock, in her first speech since taking up oversight of the financial system, devoted much of Tuesday's address to the history of regulation in Australia and lessons learned from the 2008 global financial crisis. She then focused on the 2014 steps designed to discourage annual growth in banks' investor lending to 10 per cent, toughened serviceability assessments and test the responsibility of lending practices.

Her comments come as the economic community splinters on what the Reserve Bank of Australia will do to cool skyrocketing house prices on the nation's east coast and the associated lending that's fueled by a record-low 1.5 per cent cash rate.

Data from March 1 showed Sydney property prices surged 18.4 per cent in the year through February, the fastest annual pace in 14 years.

Differing Views

On one end is Goldman Sachs Group Inc that sees a high probability of a rate increase in November; on the other is JPMorgan Chase & Co that predicts tougher macroprudential measures and rate cuts to help the rest of the economy. In the middle is an emerging consensus that expects the housing market to lose momentum naturally and rates remain on hold.

Ms Bullock, along with flagging possible new macroprudential measures, did touch on rates.

"There is also some thinking to be done about how monetary policy considerations should factor in financial stability issues, and the role that macroprudential policies might play in addressing system-wide risks in a low interest rate environment," she said.

Treasurer Scott Morrison also said he met with regulators last week following a 4.2 per cent jump in bank lending to housing investors in January.

BLOOMBERG