The Reserve Bank of Australia (RBA) has kept interest rates unchanged for the seventh consecutive meeting, maintaining the cash rate at 4.35%.
This marks 10 months since the last rate adjustment and nearly four years since the most recent rate cut. The decision follows a two-day board meeting in Sydney, with no relief for mortgage holders facing mounting financial pressure amid a cost of living crisis.
In a statement, the RBA acknowledged inflation had “fallen substantially” but it was still beyond the “midpoint” of the board’s target band of 2 to 3 per cent.
“The board is not ruling anything in or out. Policy will need to be sufficiently restrictive until the board is confident that inflation is moving sustainably towards the target range,” the RBA statement said.
The RBA decision followed last week’s announcement by the US Federal Reserve to cut rates by a hefty 0.5 percentage points in the United States, with more cuts flagged for the world’s biggest economy.
Eleanor Creagh, PropTrack Senior Economist
As the Reserve Bank held the cash rate steady at 4.35% Ms Creagh said households continue to be under pressure while consumer sentiment remains low.
“Despite recent data showing the economy is tracking through a period of weak growth, the sustained pause reflects the RBA’s desire to keep inflation on its path back to target, while balancing downside risks for growth and the labour market,” she said.
“Home price growth has persisted despite the higher interest rate environment, with the PropTrack Home Price Index indicating national home prices hit a fresh record in August.”
Prices have now cycled through 20 consecutive months of growth, although performance differs significantly around the country.
“Home prices are expected to rise in the period ahead as activity ramps up into the spring selling season. However, the expected uplift in choice, the uncertainty around timing of interest rate cuts and affordability constraints are likely to reduce the pace of price growth,” said Ms Creagh.
Nerida Conisbee, Ray White Group Chief Economist
Australia hasn’t yet joined much of the rest of the world in cutting rates but pressure is building, according to Ms Conisbee.
Monthly inflation came in at 3.5 per cent in August, just above the Reserve Bank of Australia’s upper limit of 3 per cent, so it is now looking increasingly likely that we will hit three per cent by this year.
“A cut this year is now possible. For now, the RBA has decided to hold. It is a difficult balancing act.
Inflation is still a bit too high but we are now seeing signs of weakness in the economy. We are not in recession but have now seen three quarters of almost zero growth. Unemployment is creeping up and now sits at 4.2 per cent.”
Next year is looking far more positive for mortgage holders said Ms Conisbee.
“Markets are currently pricing in four cuts for 2025 and another in early 2026. In response, mortgage providers are now cutting fixed rate home loans on average by 0.23 per cent.
“Not surprisingly, given the outlook for rate cuts, take up has been very low with consumers likely mindful of significant cuts to come.”
David Edwards, CEO First National Real Estate
The Reserve Bank of Australia’s decision to leave the cash rate unchanged at 4.35% is understandable given the current economic climate in Australia, said Mr Edwards.
“While other central banks, such as the US Federal Reserve, have opted for rate cuts, the RBA is understandably cautious and has opted to maintain its current monetary policy stance.”
He explained that the Australian economy is in a fundamentally different position than those that have implemented rate cuts. Unlike countries like Canada and New Zealand, which raised rates earlier and more aggressively than the RBA, Australia benefits from upcoming tax cuts that will provide a significant boost to aggregate household incomes. This fiscal stimulus is equivalent to a 0.5% rate cut, making additional easing potentially risky from the RBA’s perspective.
“Furthermore, the RBA has consistently communicated its commitment to controlling inflation and bringing it within its target range of 2-3%. Premature rate cuts could undermine these efforts and create long-term inflationary pressures.
“The RBA’s decision to hold rates reflects a prudent and measured approach to monetary policy, but price growth has been decelerating for several months and buyers are showing signs, through falling auction clearance rates, that they’re anxiously awaiting the RBA’s decision to make its first cut.”
Mathew Tiller, Head of Research, LJ Hooker Group
Mr Tiller, believes the RBA will wait until the next quarterly inflation figures are released before deciding when to provide relief to mortgage holders.
“If these numbers are heading in the right direction, then we could see a rate cut before
Christmas,” he said. “If they remain high then it won’t be until early next year.
“The US Federal Reserve’s recent rate cut will be in the back of the RBA’s mind, but ongoing
strength in the labour market and elevated inflation continue to be its main decision drivers.
“Buyers who keep an eye on what is happening overseas will have seen similar rate
reductions in the United Kingdom, China, Canada, New Zealand, the US, Switzerland and the
European Union. This will give them more confidence to go out and purchase a property,
knowing that mortgage repayments will be coming down over the next 12 months.”
The LJ Hooker Group is anticipating a solid end-of-year market, with appraisal numbers up 12
to 15 per cent month-on-month, indicating more stock is coming onto the market.
Mr Tiller said auction clearance rates have remained consistent and sold around 65 per cent,
however, conditions reflect a more traditional spring market with increased stock but the
same number of buyers.
“We are seeing a lot of activity out there at the moment with the increased listings but there
isn’t an oversupply as buyer demand remains steady,” Mr Tiller said.
“If the anticipated rate cut comes at the start of next year, it is likely to bring more buyers back
into the market, this will tip the supply balance towards demand, and we will see price growth
start to pick up again.
“If the RBA does deliver a rate cut in November, then it is likely the spring selling season will
be extended right to Christmas. It won’t be driven by FOMO, but there will be enough
positivity to keep listings strong and buyers active.”
Anthony Webb, Head of Victoria at Belle Property and Hockingstuart
In his 26 years working in real estate, Mr Webb said he had never seen a property market like what we are experiencing now.
“This is the longest period of uncertainty that I’ve seen and the consistency that comes with interest rates being held at 4.35 per cent is good. I think the people who are sitting back and waiting to put their home on the market will start to come forward with that consistency.”
He said keeping interest rates on hold allows buyers to take advantage of the influx of properties that have seen come to market in the lead-up to spring.
“It’s been a solid few months across Victoria, with more than 11,000 new homes listed, the highest August levels for thirteen years, which we expect to continue into the month and spring market.”
Thomas McGlynn, Chief Executive Officer, BresicWhitney
Mr McGlynn believes that the RBA’s decision to hold the cash rate has confirmed that the conditions we’re currently experiencing for Sydney property will remain more or less unchanged from now through to the end of the year.
“A hallmark of this is the ‘push and pull’ that exists between buyers and sellers on price. The economic climate has ring-fenced many buyers within a more modest financial limit.
“This has meant they’ve been unable to extend themselves on price as they may have been able to do in a more prosperous climate. Sellers on the other hand are seeking to maximise their end sale prices to put them in the best possible financial situation for their next move.”
While conditions may tip slightly more in favour of buyers from now through to December as the amount of property on the market continues to increase, he said buyers and sellers who are active in the market at present can be confident that they’ll reach a fair outcome.
“One aspect of the Sydney property market that will not change, now or into the future, is the appetite to buy well-located, quality homes across the main lifestyle markets. BresicWhitney data for the last three months shows our auction clearance rate is higher than this time last year at over 75%, while total number of properties sold, across all price points, is close to 300 – a figure that’s also in line with last year’s results.”
Michael Choi, Area Specialist Founder
Many people want the interest rates to drop to make housing more affordable, but Mr Choi, said he didn’t think that was the solution.
“Housing in my opinion will become even more unaffordable if interest rates drop as properties will rise 10-15% in value very quickly which outweighs the cost benefits of the possible interest rates drop.”
He said the government needs to figure out how to help with the supply vs demand issue in housing, especially considering migration is still strong.
“There needs to be more benefits for developers to build and investors to supply rental accommodation. From a Federal and State level they need to lower taxes for those providing housing, this will help increase the supply to the market both in the rental and ownership space.”
