RBA’s $200 billion stimulus powered house prices, not small business

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It was one of the Reserve Bank’s biggest COVID stimulus measures. While it brought down interest rates, it helped drive up house prices at a startling rate.

A $188 billion Reserve Bank stimulus program did little for the small businesses it was intended to assist through the pandemic and instead helped turbocharge house prices as banks channelled the cash into cheap mortgages.

Over one 12-month period during the pandemic, Sydney’s median house value climbed by $843 a day while Melbourne’s jumped by $473 a day. But the review found overall lending to small business effectively didn’t change under the scheme with no “statistically significant effects” on credit growth to the sector.

The review conceded monetary policy “contributed to housing price growth over the pandemic period”, on top of other COVID-era housing stimulus measures and a shift by many Australians to larger homes or properties with extra rooms. The review of the funding facility is the fourth investigation by the bank into various elements of its response to COVID. Each found issues.

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