RBA cautions on asset price inflation

Higher asset prices, especially on commercial property "need to be watched carefully, particularly where they are accompanied by higher borrowing," Philip Lowe, deputy governor of the Reserve Bank of Australia, said yesterday.

"Lower interest rates have boosted domestic asset prices, with both property and equity prices recording strong gains recently," Lowe observed in a speech that appraised "low Inflation in a world of monetary stimulus."

"The low interest rates globally have also worked to push up Australian asset prices," he said.

"Overseas investors, faced with very low returns, have looked elsewhere around the world for higher-yielding assets.

"Some of these assets are in Australia and so we have seen significant inflows into some types of investment.

"One example of this is commercial property, where foreign investors have been attracted by the historically high yields."