Australia implementing tighter lending controls to tame increasing property prices
In a bid to alleviate property price inflation in Sydney and Melbourne, the RBA has not only held the cash rate at 2% for three consecutive months, but may also be relying on new lending controls from the Australian Prudential Regulation Authority (APRA), which would restrict the borrowing capabilities of housing investors. Although it is expected that such measures would minimise risks to the property market, it remains too early to predict their full effects, admitted a RBA representative.
Activity in some non-mining sectors of the economy remains subdued, according to the Reserve Bank of Australia, although services and housing construction and investment continued to offset some of this sluggishness.

At the same time, the RBA is counting on a regulatory crackdown on bank lending to buy-to-let and buy-to-sell investors to put a lid on runaway property price inflation in Sydney and Melbourne, and head off any future distress at the country's lenders.

The RBA is counting on a regulatory crackdown on bank lending to buy-to-let and buy-to-sell investors to put a lid on runaway property price inflation in Sydney and Melbourne. Credit: Nicholas Rider

The RBA opted two weeks ago to hold the cash rate at 2 per cent for the third month in succession, after a cut in May. The bank said in the minutes of that meeting, published on Tuesday, it would closely watch "new information about economic and financial conditions" to determine whether another cut, to 1.75 per cent, was warranted.

The central bank is worried that a third cut in rates this year could further stoke housing inflation in the country's two biggest cities. However, the August meeting minutes suggest it is counting on new lending controls from the Australian Prudential Regulation Authority to help arrest this.