- Alan Oster, NAB chief economist
Reserve Bank of Australia Governor Glenn Stevens said that the central bank remained open to cutting interest rates further as the outlook for economic growth remains lacklustre, but warned that the effectiveness of further monetary policy easing may be limited and that it could even be risky. Stevens said that households already had a lot of debt and cannot afford to borrow more. The Governor also added that the surprisingly strong 0.9% growth in first-quarter gross domestic product, released last week, would unlikely to be repeated in the June quarter. So far this year the RBA has cut the cash rate twice, making its last move in May when the rate was trimmed to an all-time low 2%. Stevens also used an opportunity to talk down the strength of the Australian Dollar, saying that while it had not weakened by as much as the central bank might have expected two years ago, a further decline in the exchange rate "would add both to growth and prices."
Meanwhile, the number of home loans issued in April surged unexpectedly, led by stronger demand for mortgages among both investors and prospective owner-occupiers. The total number of new home loans is Australia issued in May rose a seasonally adjusted 1.0% on month, the Australian Bureau of Statistics said, coming in at 53,951. The value of total housing finance edged higher by 2.9% in the month to $32.71 billion.
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