Rates on hold with more mortgage pain for households
Interest rates have been left on hold at 4.35 per cent - as they have been for 12 months - with the Reserve Bank remaining committed to its inflation fight.
THE economic outlook has been downgraded as the RBA leaves interest rates on hold and remains focused on the inflation fight.
Interest rates have been left on hold and the Reserve Bank remains steadfast in its inflation fight, even as it downgrades expectations for the economy.
On Tuesday, interest rates were left at 4.35 per cent, a move universally expected and marking 12 months at that level.
Some economists were expecting a more pronounced shift in tone to reflect progress on inflation and the updated forecasts.
ANZ head of Australian economics Adam Boyton said the all-important final paragraph in the post-meeting statement was largely unchanged, with the central bank still not “ruling anything in or out” on its next decision.
“While headline inflation has declined substantially and will remain lower for a time, underlying inflation is more indicative of inflation momentum, and it remains too high,” the RBA board said in a statement.
Mr Boyton was expecting “more of a step towards neutral”, especially given the accompanying November statement of monetary policy included lower forecasts for underlying inflation, wages and economic growth.
“While most of these are small changes, the forecasts do appear to have evolved in a more neutral direction than the rhetoric,” he said.
Others observed a more dovish tinge, including AMP chief economist Shane Oliver who still expects a February rate cut.
“It continues to note that underlying inflation is still too high, and the labour market remains tight,” he said.
“But its statement and Governor Michele Bullock’s comments were less hawkish and broadly neutral consistent with slightly lower underlying inflation forecasts and greater confidence that inflation is heading down towards target again.”
REA Group senior economist, Eleanor Creagh said slowing employment and inflation “may prompt rate cuts from February 2025”, but emphasised that the “resilient labour market and stickier components of inflation could delay this timeline”.
While Creagh noted that the “higher number of properties listed for sale and uncertainty around rate cuts may slow price growth”, she said that prices are still “expected to keep rising as the selling season closes out”.
Matthew Tiller – Head of Research, Economics & Business Intelligence for the LJ Hooker Group – said: “For the property market, this decision is expected to sustain elevated listing numbers, extend the spring selling season through to Christmas, and maintain steady buyer demand.
“Buyer interest is projected to stay steady through the end of the year, supported by population growth, strong employment, wage increases, and a tight rental market.
“Current rate conditions indicate that more listings could appear early next year as homeowners manage interest rate pressures, which may help moderate price growth while maintaining balanced demand.
“Once rates start to decrease, likely in early 2025, buyer confidence and demand are expected to increase, boosting borrowing capacity and injecting fresh momentum into the market.”
