Australia’s central bank keeps the policy unchanged despite heated housing market

The Reserve Bank of Australia, as expected, kept interest rates at a record low in its October meeting. The central bank also decided to continue to buy bonds at unchanged pace of A$4 billion a week, on expectations of contraction in economic growth in the third quarter due to lockdowns in Melbourne, Sydney and Canberra that underlines the need for continued financial stimulus.

But the policymakers remain optimistic and count on accelerating recovery in the fourth quarter on satisfactory vaccination rates, as almost 80% of adult population have received at least one dose that would allow easing of restrictions and speed up recovery process.

The RBA has dismissed calls to use rates to curb the market, as low rates inflated a bubble in house prices, saying it would only harm the broader economy, keeping the prospect of ultra-low interest rates staying for years ahead, as subdued wages and inflation suggest no rate hike until 2024.