Unemployment's fall to a nine-year low of 4.5 percent begs the question for interest rate setters: has the economy revved so hard that it is about to generate inflation? Bernard Hickey looks under the hood and finds a higher performance engine.
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Reserve Bank figures show its high LVR speed limit worked in its first month of operation to halve lending of what the bank sees as the riskiest loans with deposits of less than 20%. But it also shows banks have ramped up lending to those with deposits of more than 20%, who are more likely to be rental property investors than first home buyers.
Inflation figures for the June quarter appeared to show inflation dead and buried, but economists were quick to point to signs inflation is brewing in the housing sector and could force the Reserve Bank's hand sooner rather than later.