Rate cut puts macroprudential policy in play

Ian Rogers
Australia's so far tentative embrace of macroprudential policy options will be put to the test, the Reserve Bank of Australia has made clear in its latest decision on monetary policy.

"The Bank is working with other regulators to assess and contain economic risks that may arise from the housing market," the RBA said yesterday, as it explained its decision to cut the cash rate by 25 basis points to 2.25 per cent.

The rate cut is the ninth easing in a drawn out cycle of monetary policy relaxation that dates from late 2011.

"Credit growth picked up to moderate rates in 2014, with stronger growth in lending to investors in housing assets," the RBA noted in its statement.

Policy efforts to curtailing any acceleration in these subdued rates of growth will now fall on the more vigorous APRA patrols on growth in investment lending by banks, an approach outlined in December.