High Australian household debt, falling prices to weaken consumption

Business | 19 Feb 2019 10:36 am

Australia’s central bank reaffirmed its mounting concern over the consumption outlook as households are besieged by falling property prices, weak income growth and high debt, Bloomberg reports.

The Reserve Bank said while the economy was weathering the property slump, if prices fell much further then consumption could be weaker. That would "result in lower GDP growth, higher unemployment and lower inflation,” it said in minutes of its February policy meeting released in Sydney today.

Governor Philip Lowe dumped a tightening bias in favor of a neutral policy outlook earlier this month amid increasing risks at home and abroad and a downgrade in forecast domestic economic growth. Yet he remains buoyed by resilient hiring and unemployment edging lower, suggesting faster wage growth and an uptick in inflation could still be in the offing.

"Members noted that there were significant uncertainties around the forecasts, with scenarios where an increase in the cash rate would be appropriate at some point and other scenarios where a decrease in the cash rate would be appropriate,” the central bank said.

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