RBA Governor Philip Lowe said in a speech that nationwide housing prices have fallen by 9% since peaking in 2017, bringing them back to level in mid-2016. He noted that “declines of this magnitude are unusual, but they are no unprecedented”. Movement in house prices would influence consumer spending, building activity, access to finance by small businesses and profitability of financial institutions.
Though, labor market is expected to continue to tighten with gradual increase in wage growth and faster income growth. That should “provide a counterweight to the effect on spending of lower housing prices.” And overall, Lowe said the adjustment in our housing market is manageable for the overall economy. It is unlikely to derail our economic expansion. It will also have some positive side-effects by making housing more affordable for many people.”
On monetary policy, Lowe also noted that a “strong labour market is the central ingredient in the expected pick-up in inflation”. Wag growth would “boost  household income and spending and provide a counterweight to the fall in housing price”. And, “a lot depends upon the labour market”. RBA will “continue to assess the shifts in the global economy, trends in household spending and how the tension between the labour market and output indicators resolves itself. ”
Lowe also reiterated that the probabilities for the next move to go up or down are “reasonably evenly balanced”.
Lowe speech “The Housing Market and the Economy“.
