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Australia: Macroprudential measures unlikely to lead to rate cuts - Nomura

FXStreet (Bali) - Charles St-Arnaud , Senior Economist at Nomura, notes that the RBA may introduce measures to cool the housing market, but a rate cut remains unlikely.

Key Quotes

"The housing market is a big source of concern for officials, including those at the RBA. Standard valuation metrics suggest house prices are overvalued by about 30%."

"However, thanks to record-low interest rates, affordability remains high, except for first time buyers, as they need to commit an increasingly large down payment."

"As a result of the low rates and continued strong price increases, the housing market is increasingly driven by investors, causing some financial stability concerns."

"The RBA and APRA are therefore considering macroprudential measures to curb lending to investors and an announcement is could be expected in the coming month."

"We believe a cap on the loan-to-value ratio is unlikely but measures targeted on lending to investor like an increased capital requirement or, to a lesser extent, tougher borrowing assessments are more likely."

"Nevertheless, we believe that these measures do not suggest the RBA could cut its policy rate and we continue to expect rates to be left unchanged for some time."

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