The Reserve Bank of Australia (RBA) has announced a hold on the cash rate, keeping it steady at 3.85%. This decision bucked expectations, as many market watchers, including Australia’s big four banks (ANZ, Commonwealth Bank, Westpac, and NAB), had anticipated another 25-basis-point reduction.
This hold comes after two 25-basis-point cuts earlier this year in May and February, suggesting the RBA is taking a more cautious approach despite easing inflation.
A Balancing Act: Inflation, Employment, and the Economy
Think of the RBA as a master juggler. On one hand, inflation is finally behaving itself, sitting pretty at 2.7% – right within their sweet spot of 2-3%. Good news, right? But then there are the other balls in the air, and they’re proving a bit tricky:
- Jobs are still plentiful. Unemployment is holding strong at 4.1%, meaning plenty of people are working. That’s great, but it also suggests there’s still a lot of demand in the economy.
- Wages are creeping up. Our pay packets are getting a little fatter (up 3.4%), which is awesome for us, but it can also push prices up.
- House prices are already soaring to record highs. Another rate cut could throw more fuel on that fire, making it even harder for some to get into the market.
- Cost of living still hurts. Even with inflation easing, the pain of everyday expenses is still very real for many Aussies, and the RBA is mindful of that.
What Does This Mean for Borrowers?
Today’s decision underscores the importance of staying informed about economic developments and their potential impact on your finances. While existing borrowers will be keen to see if lenders adjust their variable rates despite today’s hold (especially given that a handful of lenders held out on passing on the May cut in full), the immediate impact for many will be a period of stability in their current loan repayments. The banking majors have differing predictions on the pacing of future cuts, though their end-of-year forecasts generally fall in the 3.1% and 3.35% ballpark. Westpac, previously the most dovish, may now reassess its expectation of the cash rate bottoming out at 2.85% in light of today’s surprise hold.
Review Your Financial Strategy
Whether you’re considering buying a new home, refinancing your mortgage to secure better terms, or exploring property investment opportunities, now could be a good time to review your financial strategy. Staying proactive and understanding how these economic shifts might affect your borrowing power and repayment capacity is key.
Stay informed and make empowered financial decisions. Visit manageyourloans.com.au to explore your options and get expert advice.