Australian dollar steady over concerns of housing bubble

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The Australian dollar is trading slightly higher today after the RBA minutes meeting today where the central bank left the door open for further rate cuts, although not necessarily in March as a growing number of analysts had started to predict.

At 7.45pm (AEDT) the Aussie dollar was trading at US77.90c up from US77.84c in yesterday’s trade.

The RBA noted in today’s minutes meeting that they decided to cut interest rates to 2.25 per cent after a string of recent poor economic data.

Although the bank acknowledged that the latest interest rate cut had helped to push the Australian currency lower they mentioned they will be keeping a close eye on property prices, as any further easing of monetary policy may add fuel to the fire of an already sky high real estate market.

"Housing price inflation had moderated from the rapid rates seen in late 2013, but remained high and in Sydney and Melbourne had been well above the growth rate of household income," the RBA said.

The bank also noted there were some concerns over the amount of “Investor credit” compared to the level of “owner occupied housing credit”, and only time will tell whether moves from the Australian Prudential Regulation Authority would help curb this problem.

"Given the large increases in housing prices in some cities and ongoing strength in lending to investors in housing assets, members also agreed that developments in the housing market would bear careful monitoring," the RBA said.

“It would be important to assess the effects of the measures designed to reinforce sound residential mortgage lending practices announced by APRA in December."

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