Australia’s housing market has been a growing concern for sometime, and the RBA’s Philip Lowe’s warning only serves to fuel more speculation around Australia’s housing bubble crisis. Mr Lowe has warned that interest only loans are being issued to many with little to no expendable income.
Housing prices in Sydney and Melbourne are growing at their fastest rate in 7 years, which has prompted many to look at buying residential properties in an effort to boost property prices and make a profit. This has driven some market nervousness but it’s not fresh news.
Mixed economic data
Economic data has been fairly mixed as late, with emphasis on the jobs market following a rise in unemployment in March and an apparent slowdown in construction performance. Retail sales also took a dive in February.
Despite this GDP figures performed well in Q4, so why is the Australian Dollar being driven lower in April?
China a big concern
Commodity prices such as Iron ore have been on the decline and was seen trending 6.8% lower on Friday, leading many to believe the Chinese economy may be entering a period of economic downturn and an end to Iron ore’s stronger performance.
Markets are also worried that the Trump-Jinping meeting may have repercussions for Australia’s exports if Trump continues to demand trade tariffs on Chinese goods – 32% of Australia’s exports go to China.
Bump in the road for AUD
The FED’s decision to raise interest rates in the US has also led to a sell off of AUD. With interest rates now edging closer to the RBA’s 1.5%, investors could continue to move funds into the USD to take advantage of its safe haven status.
That being said, none of these issues highlighted are new and its worth noting that the Australian economy has enjoyed decades of a recession free economy. With the Brexit negotiations due to take place in the weeks and months ahead, GBP/AUD could easily reverse from its recent highs moving back towards 1.60.