No relief yet: Aussies buckle down as interest rates stagnate

The Reserve Bank of Australia (RBA)’s decision to hold the cash rate at 4.35 per cent for the twelfth consecutive month came as no surprise to economists across Australia, who have unanimously been expecting a hold. 

While many predict the cash rate to fall next year, opinions are divided as to when the first cut will take place. 

Graham Cooke, head of consumer affairs at Finder, says that pressure is mounting for a rate cut in February 2024. 

“With a record high 47 per cent of borrowers struggling to make their repayments in October, thousands will be forced to cut back spending in other areas,” Cooke says. 

“Many are depending on the multiple rate cuts predicted to come in 2025.” 

Economists warn that while headline inflation is now within the bank’s target range of 2-3 per cent, underlying inflation remains high. 

“The good news is that the latest Consumer Price Index (CPI) number is within the RBA’s band,” says Aarti Singh from The University of Sydney. “However, since other measures of CPI that exclude the more volatile items are still outside the band, RBA may wait before lowering rates.” 

Matt Turner from GSC Finance Solutions notes that cutting the cash rate before Christmas could actually sabotage the RBA’s inflation goals by triggering a spending spree. 

“By cutting too early, the RBA potentially lights a match for the property market which in turn could lead to further inflation in that sector.” 

“I also believe that cutting pre-Christmas would be an invitation for people to spend as the first cut will be a psychological barrier that is removed for a lot of households,” says Turner. 

When it comes to the property market, LJ Hooker Group’s head of research Matthew Tiller believes conditions will remain as they were. 

“We may see a slight increase in listings as mortgage holders who have been holding out for relief this year now look to sell to improve cash flow, but it won’t be a surge of stock,” Tiller says. 

He says that while the rate hold “isn’t good news for those struggling with home loan repayments, there is a lack of urgency for the RBA to take action.” 

“Employment remains positive and people are still spending even with the strain on household budgets,” Tiller says. 

In the meantime, it’s full steam ahead for the property market, with auctions expected as late as 21 December.