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Australia: Shares rise on eased home loans, central bank comments

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Australian shares advanced on Tuesday, boosted by financials after mortgage rules were eased in a bid to spur borrowing and the chance of a June interest rate cut increased.

[SYDNEY] Australian shares advanced on Tuesday, boosted by financials after mortgage rules were eased in a bid to spur borrowing and the chance of a June interest rate cut increased.

The S&P/ASX 200 index shed early losses to rise 0.4 per cent or 24 points to 6,500.1, hitting its highest closing since December 2007. On Monday, the benchmark surged 1.7 per cent.

In a highly anticipated speech, RBA Governor Philip Lowe said the central bank would consider the case for lower interest rates in June, adding that a lower cash rate would support employment growth and help meet inflation targets.

ANZ, in a note, said "This is as clear a signal as the RBA ever delivers. We think the RBA will cut in June."

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In ANZ's view, the central bank will want to see the combined impact of a rate cut, lower taxes and eased mortgage rules does before it makes another move.

Financial stocks surged 1.7 per cent, helped when the Australian Prudential Regulation Authority (APRA) proposed relaxing the rules for how banks check people's ability to service home loans.

Lenders rose on the expectation that the easing would boost borrowing and help combat a sustained drop in house prices and record-low credit growth.

Mr Lowe also said the proposed easing of lending criteria by Australia's prudential regulator would be "complementary" to a rate cut, if it takes effect.

The "Big Four" banks surged. Commonwealth Bank of Australia gained 2 per cent and Westpac Banking Corp jumped 2.7 per cent.

Australia and New Zealand Banking Group added 2.1 per cent and National Australia Bank 1.5 per cent.

New Zealand's benchmark S&P/NZX 50 index fell 0.2 per cent or 18.06 points to finish at 10,216.09.

REUTERS