PHOTO: FILE
Reserve Bank left cash rate on hold at 12-year high of 4.35 per cent
Australian home borrowers are set to face more pain even though the Reserve Bank has left interest rates on hold for the fifth straight meeting (pictured is a Melbourne auction)
Headline inflation is still well above the RBA’s 2 to 3 per cent, with a monthly inflation measure showing Australia’s consumer price index in April climbing to 3.6 per cent, up from 3.5 per cent.
The ANZ Bank last week forecast the first rate cut would be delayed to February 2025, out from November.
Australian home borrowers are set to face more pain even though the Reserve Bank has left interest rates on hold for the fifth straight meeting (pictured is a Melbourne auction) + 2 View gallery Australian home borrowers are set to face more pain even though the Reserve Bank has left interest rates on hold for the fifth straight meeting (pictured is a Melbourne auction)
The RBA has declined to follow the European Central Bank’s lead in this month cutting interest rates, simply because Australian inflation is still too high (pictured is Reserve Bank Governor Michele Bullock)
‘Inflation is easing but has been doing so more slowly than previously expected and it remains high,’ it said.
‘Inflation has fallen substantially since its peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance.
‘But the pace of decline has slowed in the most recent data, with inflation still some way above the midpoint of the 2–3 per cent target range.’
Inflation isn’t expected to fall below three per cent until late 2025.
‘The board expects that it will be some time yet before inflation is sustainably in the target range,’ it said.
The RBA has declined to follow the European Central Bank’s lead in this month cutting interest rates, because the EU’s inflation rate of 2.6 per cent is much lower than Australia’s.
A fall in unemployment in May to 4 per cent, down from 4.1 per cent in April, is also worrying the Reserve Bank.
‘Conditions in the labour market eased further over the past month but remain tighter than is consistent with sustained full employment and inflation at target,’ the RBA said.
This means Australia’s four million home borrowers will most likely have to wait for relief from the most aggressive pace of monetary policy tightening since the late 1980s.
Treasurer Jim Chalmers focused on how the RBA hasn’t raised rates since November 2023, even though that move was the 13th increase in 18 months, with 12 of those rises occurring since Labor won the last election.
‘Today’s decision by the independent Reserve Bank means by the time the board next meets, it will be approaching nine months since the last interest rate hike,’ he said.
‘Having rates on hold means a little bit more certainty in tough times for mortgage holders and small businesses.’
SOURCE: THE DAILY MAIL