Lockdowns can force the RBA to reconsider the stimuli
“This is a growing crisis with around 100 days of state lockdown so far this year and unfortunately the current number of cases means that this number will certainly increase,” said ARA Managing Director Paul Zahra.
While retail and construction have been hit hard by the recent lockdowns, the real estate market remains strong thanks in part to the RBA’s ultra-light monetary policy stance.
CoreLogic reported Monday that through July, home values rose 1.6 percent nationwide to 16 percent in the past 12 months, the fastest increase in more than 25 years.
House prices in Sydney rose 2 percent in July, with the average home value rising 2.1 percent to nearly $ 1,260,000 and apartments increasing 1.6 percent to about $ 810,000.
Melbourne prices rose 1.3 percent during the month, with the median value of a home rising 1.7 percent to $ 946,000 and apartments increasing 0.4 percent to $ 613,000. Canberra’s average home value rose another 3 percent to a record $ 905,000.
The values continue to rise not only in the capitals. 70 of the 88 national statistical regions defined by the Australian Bureau of Statistics reached record highs in July.
However, Tim Lawless, research director at CoreLogic, said there were signs that the domestic market was losing momentum as the monthly growth rate fell below its March high of 2.8 percent.
“The affordability deterioration is likely a major contributor to the slowdown here, along with the negative impact on consumer sentiment as the city goes through a longer embargo,” he said.
A primary concern for the RBA is how the labor market will perform under the weight of the lockdowns.
The ANZ job advertisements in July fell by a modest 0.5 percent. The decline was constant over the month and not accelerating as restrictions tightened in Sydney, ANZ senior economist Catherine Birch said.
During last year’s restrictions, job ads fell 12.9 percent in March and 53 percent in April.
Ms Birch said two key factors are likely to mitigate the labor market impact this time around – political support such as JobSaver, which requires companies to maintain their workforce, and companies that “hoard” workers to avoid the costs and delays of one-time reinstatement restrictions relaxed.
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