Fed: RBA says households generally coping with rate rises

AAP General News (Australia)
02-11-2008
Fed: RBA says households generally coping with rate rises

By Colin Brinsden, Economics Correspondent

CANBERRA, Feb 11 AAP - Households may be griping over the latest round of interest
rate rises, but the Reserve Bank of Australia (RBA) says we are generally coping well
with the rising cost of borrowing.

It also says households are saving more of their incomes - at the highest rate in seven years.

The RBA raised its cash rate by a further quarter percentage point last week - its
11th consecutive increase since May 2002.

In its quarterly monetary policy statement released today it indicated that another
interest rate rise is likely in coming months because of the risk of inflation remaining
uncomfortably high.

"The household sector overall appears to be handling its debt-servicing obligations
well, with only a small share of households experiencing difficulties making their required
payments," the RBA said in its statement.

"The household saving rate has also been rising - net saving was around three per cent
of household disposable income in the September quarter, its highest rate in seven years."

It says the generally healthy state of finances has provided support to the housing
sector, especially the established housing market.

It notes that nationwide house prices increased strongly in 2007 with recent Australian
Bureau of Statistics data showing capital city house prices increasing 12 per cent over
the year.

"Nonetheless, recent data suggest housing credit growth and loan approvals slowed slightly
in late 2007 compared with the first half of the year," it said.

"These data would not yet reflect much of an impact from the November tightening in
the cash rate nor any impact from the latest cash rate rise and the additional increases
in bank lending rates early this year."

However, it says growth in housing construction has remained relatively subdued following
several years of weakness.

"The shortfall in supply of new dwellings relative to underlying demand remains evident
in the rental market - vacancy rates are close to historical lows in most cities, and
rents have continued to accelerate."

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KEYWORD: HOUSEHOLDS RBA

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