SYDNEY • Australia's central bank kept its focus on employment and housing markets even as signs emerge of improvements in both.
While property had been "rising briskly" in Sydney and Melbourne, there were also some signs that price pressures were beginning to ease, the Reserve Bank of Australia (RBA) said yesterday in minutes of this month's policy meeting when interest rates were kept at 1.5 per cent.
Similarly, while employment gains had strengthened in recent months, growth in hours worked had declined, it said.
Policymakers met before last month's employment data showed a third straight monthly gain and the jobless rate fell to a four-year low of 5.5 per cent.
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The RBA also reiterated growth in housing debt had outpaced growth in household incomes, and noted measures by the banking regulator designed to cool lending "were yet to have their full effect".
"The board continued to judge that developments in the labour and housing markets warranted careful monitoring," the bank said.
RBA governor Philip Lowe has stressed the importance of ensuring financial stability as a record-low cash rate drives up borrowing and asset prices.
He has kept borrowing costs unchanged since taking the helm in September, and is prepared to tolerate weaker inflation in order to avoid further pumping up housing.
"Wage growth had remained low and this was likely to remain the case for some time yet," the RBA said. "Low growth in incomes, along with high levels of household debt, appeared to have been restraining growth in household consumption."
Australia is suffering from a similar malaise to other developed nations as workers, worried about job security, are scaling back wage demands, restraining inflation and leaving households with little spare cash.
Indeed, Mr Lowe urged them, in a speech on Monday, to seek fatter pay packets. The falling jobless rate may begin to embolden workers, with the minutes saying forward-looking indicators pointed to further job growth ahead and "a gradual erosion" of spare capacity in the labour market.
Mr Paul Dales, chief Australia and New Zealand economist at Capital Economics, said: "The RBA is getting more concerned about the outlook for consumption and, just as it didn't get too depressed by the rise in the unemployment rate to 5.9 per cent earlier this year, it won't get too excited by the fall to 5.5 per cent."
Despite a weak first-quarter gross domestic product result, the central bank maintained that economic growth will gradually accelerate over the next couple of years to a little above 3 per cent per annum.
The RBA also said the government's budget last month would have little effect on its near-term outlook for the economy as there was little change in the deficit figures, while proposed infrastructure spending is likely to occur after 2019.