RBA’s Christmas present to off-the-plan purchasers

At its board meeting today, the Reserve Bank of Australia (RBA) has decided to pause interest rates at 4.35% – an early Christmas present, if you will. This comes after the Board increased interest rates last month by 25 basis points, following a four-month period of keeping the rates steady at 4.10%.

At the HKMA-BIS High-Level Conference in Hong Kong, RBA governor Michele Bullock said that Australian households were managing despite the rate rises over the past year.

“We have, like other countries, raised interest rates much more quickly than we have in the past, and that has created, in fact, a lot of political noise and a lot of noise from the general public,” she said.

“People are very unhappy.

“But what I’d like to highlight here is though, despite that noise, households and businesses in Australia are actually in a pretty good position.

“Their balance sheets are pretty good.”

For homeowners and property buyers, the current cash rate means the average borrower with a 25-year $500,000 loan at the start of the hikes could soon be paying approximately $1,210 more monthly on their mortgage. This is a 52% increase since the beginning of the cash rate hikes in May 2022.

In a statement made by Michele Bullock following today’s announcement, the RBA governor reflected on last month’s interest rate rise decision.

“Housing prices were continuing to rise across the country as was the number of new mortgages,” she said.

“Given this, the Board judged that the risk of inflation remaining higher for longer had risen and an increase in interest rates was therefore warranted to be more assured that inflation would return to target in a reasonable timeframe.”

She affirmed that returning inflation to target within a reasonable timeframe remains the Board’s priority.

“High inflation makes life difficult for everyone and damages the functioning of the economy,” she continued.

“Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks.

“In making its decisions, the Board will continue to pay close attention to developments in the global economy, trends in domestic demand, and the outlook for inflation and the labour market.

“The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome.”

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