Philip Lowe: The housing market and the economy

Address by Mr Philip Lowe, Governor of the Reserve Bank of Australia, to the AFR Business Summit, Sydney, 6 March 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Thank you for the invitation to address this year's AFR Business Summit. It is good to be back here again.

As you would be aware, the Reserve Bank Board met yesterday and left the cash rate unchanged at 1.5 per cent. I would like to use this opportunity to highlight some of the issues we discussed at the meeting. Before I do that, though, I would like to focus on the housing market and its implications for the economy. Readers of the monetary policy minutes would have noticed that at its February meeting the Board discussed a special paper taking a deep dive into this topic. My remarks today draw from that paper. I will first focus on the current state of the housing market. Then, I will discuss the main drivers of recent movements in housing prices, before turning to the implications for the broader economy and the financial system.

The Current State of the Housing Market

Australians watch housing markets intensely, perhaps more so than citizens of any other country. Over the five years to late 2017, they saw nationwide housing prices increase by almost 50 per cent.