The Organisation for Economic Cooperation and Development has called on the Reserve Bank to tighten monetary policy next year, as prices in the nation’s largest property markets continue to rise strongly.
In its Global Economic Outlook report for Australia, the OECD said it expects the reserve bank to begin raising interest rates “towards the end of 2017”.
Interest rates would need to rise “given likely monetary policy developments elsewhere”, and to “unwind tensions from the low-interest environment, notably in the housing market”, the report said. Property “has in many places experienced rising prices for some time”, the report stated.
The report also recommended the government use tax reform to boost economic growth, and singled out in particular changes to the GST and land tax.
In a recent speech, Reserve Bank governor Dr Philip Lowe also indicated the central bank may be close to the end of the current rate-cutting cycle.
We are already seeing early signs the interest rate cycle is turning, with some lenders already lifting fixed rates on mortgages.
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