The Reserve Bank of Australia is finding itself unable to respond to a soft labour market because of surging housing debt and property prices, forcing it to keep official interest rates steady.
In a sign of the Reserve Bank's likely policy constraint, minutes of the RBA April board meeting specifically mentioned the need to pay heed to both housing and jobs.
"Developments in the labour and housing markets warranted careful monitoring over coming months," the central bank said, according to the minutes released on Tuesday.
Official interest rates were left at a record low 1.5 per cent two weeks ago - or a seventh straight meeting - just as regulators started a renewed crackdown on riskier bank lending.
Financial markets are still factoring a slim chance of another official rate cut this year, largely because the jobless rate continues to remain at a 13-month high at 5.9 per cent.
Last week's jobs data for March showed employment jumped by 60,900 jobs, but most analysts discounted the large gain.
At the same time as maintaining doubts about the state of the labour market, the board continued to note rising risks in the housing market in Sydney and Melbourne, where investor-borrowing growth has picked up sharply.
CoreLogic estimates house prices have leapt 19 per cent in Sydney over the past year.
RBA Governor Philip Lowe has repeatedly warned that cutting rates further would only encourage more borrowing by households who are already heavily indebted, outweighing any economic benefits.
At the same time, there is little scope for the Reserve Bank to hike the cash rate in order to cool the housing market given the lack of wages growth would almost certainly crush consumer spending.
The minutes noted that the tighter regulatory rules on banks would take "some time" to take effect and that APRA and ASIC would do more if needed.
The central bank said the economy likely grew at a moderate pace in the first quarter and repeated its warning that a rise in the Australian dollar could complicate the outlook.
