Aussies endure as interest rates remain stagnant,
The Reserve Bank of Australia (RBA) decided to keep the cash rate at 4.35% for the twelfth month.
Economists across Australia had expected this, with no surprises as the rate remains unchanged for another consecutive month.
Though many forecast a rate drop next year, there is disagreement on when the first reduction will occur.
Graham Cooke, head of consumer affairs at Finder, believes pressure is building for a rate cut by February 2024.
“With 47% of borrowers struggling to make repayments in October, many will need to cut back on spending,” says Cooke.
“People are counting on multiple rate cuts predicted for 2025 to provide some relief from financial strain.”
Economists caution that although headline inflation is now within the RBA’s target range of 2-3%, underlying inflation remains elevated.
Aarti Singh from The University of Sydney highlights that while the latest Consumer Price Index (CPI) is within the target range,
other measures excluding volatile items remain outside the band, meaning the RBA may hold off on rate cuts for now.
Matt Turner from GSC Finance Solutions warns that reducing the cash rate before Christmas could undermine the RBA’s inflation goals.
He argues that an early rate cut might spark a spending spree, potentially overheating the economy and worsening inflation.
“Cutting the cash rate too soon could ignite activity in the property market, which might contribute to further inflation,” says Turner.
He also believes that a pre-Christmas cut could encourage spending, as it removes a psychological barrier for many households.
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LJ Hooker Group’s head of research, Matthew Tiller, believes the property market will remain stable and unchanged for now.
He notes that there may be a slight increase in listings as mortgage holders, hoping for relief, consider selling.
However, Tiller emphasizes that it won’t be a surge in stock, as sellers are not rushing to offload properties.
Tiller points out that the RBA’s decision to hold rates “isn’t good news for those struggling with repayments.”
But, he adds, there is little urgency for the RBA to act, given the overall positive economic conditions.
“Employment is strong, and consumers continue to spend despite the strain on household budgets,” Tiller explains.
For now, the property market is moving forward, with auctions scheduled as late as 21 December.
