The exchange rate has come down against major currencies, and competition among banks has reduced interest rates to business and personal borrowers. •  The most likely outcome over the next 12 months at the present policy setting is for inflation to return to its target range and for domestic demand to remain at or above trend growth.
Recent evidence from several countries, including Australia, shows that during periods where house prices are rising rapidly, households tend to react to this by increasing their consumption expenditure faster than their income. They can do this by either reducing discretionary savings, or by borrowing against the equity in their house to finance non-housing expenditure, a process referred to as 'housing equity withdrawal'.