SYDNEY (Reuters) – Australian home prices raced at the fastest clip in almost two decades in February and job advertisements skyrocketed, data showed on Monday, as the economy rapidly emerged from its once-in-a-generation recession.
Separate data out on Monday showed new mortgage loans climbed 10.5% to a record high in January with the value of loans commitments to owner-occupiers 52.3% higher than the previous January.
The startling figures would be welcomed by the country’s central bank which has slashed its cash rate to a record low 0.1% and launched an unprecedented bond buying programme to keep borrowing costs low.
It has also promised to keep policy at the current accommodative levels until inflation is within its 2-3% target band, a goal that has remained elusive for years.
While Monday’s strong figures paint a rosy picture of Australia’s A$2 trillion ($1.6 trillion) economy, they are unlikely to change the minds of top policymakers about winding back some of the monetary stimulus, economists said.
The Reserve Bank of Australia (RBA), in fact, boosted the size of its daily quantitative easing programme, by announcing a larger-than-usual A$4 billion worth of bond purchase on Monday.
The move comes just a day ahead of its monthly board meeting where it is likely to leave rates at 0.1%, though its post-meeting statement would be closely scrutinised for any commentary on soaring home prices, rising bond yields and an appreciating currency.
“Today’s actions suggests that the RBA is adopting a more flexible approach to unconventional policy which we would commend,” said Royal Bank of Canada economist Su-Lin Ong.
“It is bolder, more decisive action which is needed at a time when markets are testing the RBA’s resolve,” Ong added.
“We would expect the RBA tomorrow to add a firmer commitment in its post board meeting statement noting that it ‘will act to ensure its YCC target is met’ and ‘key borrowing rates stay low’.”
Australia’s early success in curbing the coronavirus pandemic and reopening its economy together with government incentives and record low mortgage rates are driving up home prices, consumer spending, business confidence and jobs growth.
Indeed, data later this week will likely show Australia’s economy accelerated by a brisk 2.5% in the fourth quarter, though that would still not be enough to offset the massive contraction suffered earlier in 2020.
The current quarter ending in March is likely to be solid too.
Monday’s figures from Australia and New Zealand Banking Group showed total job ads grew 7.2% in February from January, when they rose a revised 2.6%. At 174,010, ads were at their highest level since October 2018.
The housing sector, which is a major employer, is in-part driving the current economic upswing.
Monday’s data from property consultant CoreLogic showed national home prices rose 2.1% in February, from January, the fastest increase since August 2003.
Prices across the major capitals rose 2% in January from the previous month, to be up 2.6% on the year.
The strength in home prices was consistent with the surge in new housing finance commitments with loans to first home buyers soaring 10.1% to be up a whopping 73% on a year ago, according to data from the Australian Bureau of Statistics (ABS).
Investor activity was buoyant too.
“The ongoing strength in finance commitments points to more solid house price gains in the months ahead although the 2% capital city rise may be hard to beat,” said AMP Chief Economist Shane Oliver.
Oliver expects home prices to rise another 5%-10% this year and next though “the stop to immigration and weak rental markets will likely constrain price gains in inner city areas and units in Melbourne and Sydney.”
($1 = 1.2895 Australian dollars)
(Reporting by Swati Pandey; Editing by Sam Holmes)