The minutes, released on Tuesday, show that the RBA is concerned about the prospect of a housing bubble should they cut rates further but that they would not rule out further cuts on this basis.
“Members also noted that the housing market and other asset prices might be overly inflated by lower interest rates,” the minutes read.
“By themselves, higher asset prices were considered unlikely to present a risk to macro-economic and financial stability. This assessment would need to be reviewed if rapidly increasing asset prices were accompanied by materially faster credit growth, weak lending standards and rising leverage.”
There have also not yet been signs of a pick-up in household spending following reductions in the cash rate and receipt of tax returns, although it may be too early to tell whether successive interest rate cuts have had an effect.
However, David Plank, head of Australian economics at ANZ, told Investor Daily that he does not anticipate another rate cut in the near future.
“We think it’s less than fifty-fifty at this stage… we’ve got it pencilled in for early next year rather than November.”
“If the Fed doesn’t go in October than I think the RBA will leave things alone in November.”
Mr Plank points to a change in the wording of the RBA’s minutes as one sign that further cuts may be a ways off.
In September, the RBA said they “would ease monetary policy further if needed”; in October, the RBA said they “were prepared to ease monetary policy further if needed”.
However, consumer confidence has remained low despite the successive rate cuts and did not appear to rise in response to the break in the trade war on Friday.
“What we’re seeing in confidence is a significant divergence between financial conditions – which is really asking people how they feel about their own finances – and what they think about the economic outlook,” Mr Plank said.
“People’s views about their own finances is at quite an elevated level, well above average. But it’s been more than offset by pessimism about the economic outlook.”
