Lower property prices curtail household spending

Reserve Bank of Australia governor Ian Macfarlane said that “inflationary pressures are not building as quickly as might have been expected earlier in the year” and that with economic growth cooling, another interest rate rise is a long way off. Macfarlane called the slowdown a “healthy correction”. Macfarlane also talked of wealth affects in the property market curtailing household spending. Macfarlane said households have stopped adding to their consumption by borrowing against the equity in their houses. He said he did not know whether this household consolidation would continue, for how long it would last, or whether it would intensify, and that this was “a situation that bears close watching.”