Australia central bank holds rates as housing market booms

FILE PHOTO: Pedestrians walk past the Reserve Bank of Australia building in central Sydney, Australia, February 10, 2017. REUTERS/Steven Saphore/File Photo

SYDNEY: Australia's central bank held rates at near-zero in a widely expected move on Tuesday as easy monetary and fiscal policies propped up the coronavirus-hit economy, fueling demand for homes and boosting construction activity.

At its last policy meeting of the year, the Reserve Bank of Australia (RBA) left its cash rate and the three-year government bond yield target at 0.1% while maintaining its A$100 billion quantitiative easing programme.

In a short post-meeting statement, Governor Philip Lowe sounded optimistic about a recovery as the country has confidently reopened with almost zero new coronavirus cases.

"The economic recovery is under way and recent data have generally been better than expected," Lowe said.

"This is good news, but the recovery is still expected to be uneven and drawn out and it remains dependent on significant policy support." Lowe reiterated the board was unlikely to raise the cash rate for at least three years and was prepared to do more if necessary.

The decision to stand pat comes as data indicates Australia's A$2 trillion economy likely rebounded sharply last quarter from its first recession in three decades.

Australia's worst downturn since the Great Depression, rising unemployment and feeble inflation prompted the RBA to slash the cash rate three times this year while the federal government unleashed a A$300 billion fiscal spending plan.

The stimulus has ignited fire in the property market where home prices jumped 0.8% in November while approvals for new homes have surged to 20-year highs.

Lowe said the fiscal and monetary support will be required for some time, given both employment and inflation are expected to stay subdued.

He did not mention the housing market in his statement though he might be grilled on the topic by a parliamentary economics committee where Lowe will make an appearance on Wednesday. (Reporting by Swati Pandey; Editing by Sam Holmes)

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