IMF: Low-interest rate is here to stay

By Gerv Tacadena

IMF: Low-interest rate is here to stay

In a statement after its visit to Australia, the International Monetary Fund (IMF) predicted that the low-interest rate environment in Australia would probably persist for years.

The organization also said the country can already expect a pickup in growth given the stronger global growth and a boost from infrastructure investment. However, this pickup is expected to be modest, as the country grapples with low wage growth and low-interest rates.

"Sustained increases in inflation should emerge once the economy has been at full employment for some time. Securing the return to full employment and inflation objectives durably will require continued macroeconomic policy support," IMF said.

Also Read: How a shift in public policy could ease the affordability crisis

IMF also noted that while the housing market in Australia is expected to cool, imbalances like poor housing affordability and growing household debt are unlikely to be corrected anytime soon. Cooling would be driven by the building completion rate keeping up with the demand seen in major eastern capital regions.

With this, IMF said prudential policies actually lessen risks to the financial sector from unwanted housing market imbalances and high household debt but cautioned that "continued efforts at strengthening housing supply in major metropolitan areas are needed for broad housing affordability.”

The release of IMF's statement came alongside the speech of Reserve Bank of Australia head of financial stability Jonathan Kearns, which stated that the house prices in Australia, had already risen by two-thirds since 2009. Kearns also said the growth of housing credit has already surpassed household incomes.

Kearns suggested that the property market should not worry too much about the negative impacts arising from foreign purchases, as they do not, on the whole, trim the supply available to local residents.

“In fact, they may actually contribute to the expansion of the housing stock,” he told the Guardian.