"Members observed that recent responses by banks to the suite of measures implemented by APRA in respect of lending to investors in housing, including a tightening in lending conditions, would be expected to reduce the risks relating to the housing market, although it was too early to gauge their full effects," the bank's board noted in its minutes. With the lower Australian dollar also helping exporters, the RBA's focus now was any signs of a pick-up in those sectors of the economy not affected by the sharp downturn in mining infrastructure development and declining commodity prices. "Members observed that survey measures of business conditions had been strongest for household and business services, which were also the sectors that had experienced the strongest employment growth over recent years," the bank said in the minutes. "In contrast, business conditions and employment had been weaker in those sectors of the economy mainly involved in goods production and distribution." This, it said, left uncertainty around the unemployment rate, as household services such as insurance and healthcare were less labour-intensive than manufacturing, for example. Business investment, which can lead to jobs growth, was also sluggish, the RBA noted. "Members acknowledged that there remained considerable uncertainty around the timing and strength of the recovery in non-mining business investment," the bank said. Economists, however, interpreted the minutes as largely upbeat, although they noted that they pre-date recent market turmoil triggered by China's devaluation of the yuan. "The September RBA commentary will be more informative on how the board view recent China developments," JPMorgan's chief economist for Australia, Ben Jarman, said. "Still, we view the overall tone of the minutes as reflecting the board's mounting conviction, underpinned by the domestic data, that the policy stance is well-positioned." National Australia Bank's chief economist for markets, Ivan Colhoun, agreed. "Overall, the minutes had a more positive slant to them than has mostly been evident in the past six months," he said. "This likely reflects the improved labour market outcomes of recent times. "The market is likely to have an increased focus on labour market trends over coming months as any significant changes in this data could cause the RBA to rethink its outlook, which increasingly looks like being for an extended period of unchanged Australian interest rates at 2 per cent," he said.
In a bid to alleviate property price inflation in Sydney and Melbourne, the RBA has not only held the cash rate at 2% for over coming 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.