The headline rise in housing finance in July is no cause for the Reserve Bank to raise rates, according to peak building and construction organisation Master Builders Australia.

Mr Peter Jones, Chief Economist, said, “The key finance indicators show that demand remains flat.”

Mr Jones said, “Loans for construction of dwellings and purchase of new dwellings, combined, fell back in July but are almost on par with July last year and beginning to show signs that a period of unchanged interest rates may be working to at least stabilise demand as a precursor to an upswing in residential building.”

He said, “The Reserve Bank has an important role in underpinning consumer confidence and needs to keep interest rates on hold to encourage an upswing in housing.”

“The period of rates stability has allowed the housing market to find a floor but consumer caution and overseas events appear set to work against any upswing.”

UPDATE: The Reserve Bank of Australia decided to leave the cash rate unchanged at 4.75 per cent at its board meeting on Tuesday.
Governor Glenn Stevens said: "Most financial indicators suggest that monetary policy has been exerting a degree of restraint. Credit growth has declined over recent months and is very subdued by historical standards, even with evidence of greater willingness to lend. Most asset prices, including housing prices, have also softened. The exchange rate is high. Each of these variables is affected by other factors as well, but together they point to financial conditions being tighter than normal."