ANZ chief executive Shayne Elliott has said the Reserve Bank may need to raise official interest rates earlier than expected, warning that rising house prices could lead to social and political problems.
Mr Elliott said on Thursday he thought the rebound in house prices had “a fair way to go,” but highlighted that extreme price movements for sustained periods were not good for the broader economy.
“So it’s starting to get into that area where people are starting to raise a few eyebrows, wondering if it’s a bit unhealthy at these levels,” he said. “Certainly it can’t keep going at sort of double digit rates for very long because you start getting real social and political problems as a result. And nobody wants that.”
ANZ Bank chief Shayne Elliott said the RBA may need to raise interest rates earlier than 2024.Credit:Arsineh Houspian
Mr Elliott, who made the comments in an interview on radio station 3AW, said there was “a lot of money sloshing around” and Australians were investing in housing and the stock market. While the RBA has said it does not expect to raise interest rates from 0.1 per cent until 2024, Mr Elliott said the central bank could be forced to act earlier if inflation emerged in the wider economy, as well as in asset prices.
“I mean, they’ve sort of said they’re not intending to do that for a couple of years. But things change,” Mr Elliott said.
The RBA, meanwhile, has signalled it remains untroubled with the rapid growth in house prices. However, it is keeping a close eye on any deterioration in bank lending standards.
RBA’s head of financial stability Jonathan Kearns said on Thursday that rising house prices went hand in hand with growth in household debt, adding that homebuyers should build “buffers” into their budgets so they could cope with a loss of income, or higher interest rates at some point in the future.
“What we’re seeing at the moment is, I think, not of concern,” Dr Kearns said on a webinar on Wednesday. “One thing you would expect from monetary policy, when you have very low interest rates, is that low interest rates tend to stimulate asset prices.”
As regulators keep a close eye on the market, he reiterated that the central bank did not want to see any erosion in banks’ lending standards.
