RBA keeps rates on hold as borrowers sweat on relief

Australia’s central bank kept interest rates on hold for a fifth consecutive meeting as thousands of households anxiously await a long-announced cut.

The current rate, the highest since September 2011, is unchanged from November 2023.

In its monetary report, the RBA’s board said it was fully aware of the current financial conditions affecting Australian households – but more data was needed before moving on to rates.

“There is uncertainty around consumption growth. “Real disposable incomes have now stabilized and are expected to pick up later in the year, helped by lower inflation and tax cuts,” Bullock said.

“There is also an increase in wealth driven by house prices. Together, these factors are expected to support consumption growth next year.

“But there is a risk that household consumption will rise more slowly than expected, leading to continued weak output growth and a marked deterioration in the labor market.”

However, the board declined to be drawn on when rates will be cut — or if they will be cut at all.

”Although recent data has been mixed, it has reinforced the need to remain vigilant on upside risks to inflation,” the monetary statement said.

“The interest rate path that will best ensure that inflation returns to target over a reasonable period of time remains uncertain and the Board is not deciding anything in or out.”

Graham Cooke, head of consumer research at Finder, said the decision could feel like a gut punch to homeowners seeking a rate cut.

“With inflation showing little sign of falling quickly, hopes of a rate cut that would ease pressure on household budgets appear more distant,” he said.

“Rising costs are relentless, eating into savings and squeezing wallets, causing real financial pain for many.”

Anneke Thompson, chief economist at CreditorWatch, said she expected the next move for the RBA to be a rate cut – but that could not happen until next year.

“Given the stress facing Australian households, both mortgaged and renters, and many small and medium-sized businesses, we think the RBA is unlikely to raise the cash rate going forward,” Thompson said.

“The more likely scenario is for the RBA to maintain pressure on prices by keeping the cash rate at 4.35% at the start of 2025 and only cutting it once the impact of lower migration levels begins to weigh on inflation in the services.’

Steve Mickenbecker, chief executive of financial services group Canstar, said stronger-than-expected inflation was pushing back the forecast timelines of most major lenders.

“Bad news for borrowers, ANZ Bank has pushed back its forecast for the first rate cut to February 2025 in response to slower-than-expected inflation progress towards the RBA’s 2 to 3 per cent target range,” he said.

“The other big banks are sticking to November 2024 for now.

“The slower trajectory towards the Reserve Bank’s inflation target range was reflected in higher term deposit rates, with nine banks raising 21 rates by an average of 0.41 per cent.

“Not much good news for borrowers as the two lenders that cut rates last week were countered by three that increased them.”