An interest rate pause as RBA adopts ‘wait and see’ strategy
Economic conditions remain tight as the board refuses to rule out further increases before the year ends
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Interest rates have been left on hold following the meeting of the RBA Board today.
The cash rate will remain at 4.1 percent as the board acknowledged the need to balance drawing down inflation against the possibility of a looming recession.
Governor Philip Lowe said in a statement that returning inflation to a more manageable level within ‘a more reasonable time frame’ is still the board’s objective but that recent data points to a 2 to 3 percent target ‘over the forecast horizon’.
The Australian Bureau of Statistics last week released data that inflation had fallen for the second consecutive month to 6 percent, down from a high of 7.8 percent in December 2022.
Dr Lowe said it would most likely take a year or more to return inflation to the target range but that the board was determined to do so.
“Inflation in Australia is declining but is still too high at 6 percent,” he said. “Goods price inflation has eased, but the prices of many services are rising briskly. Rent inflation is also elevated.
“The central forecast is for CPI inflation to continue to decline, to be around 3¼ per cent by the end of 2024 and to be back within the 2–3 percent target range in late 2025.”
Dr Lowe also forewarned that further interest rates could not be ruled out.
CoreLogic research director Tim Lawless said while the news would be welcomed by mortgage holders, the economic pressures that could trigger further rises remain.
“Highlighting the uncertainty ahead, some economists have already called a peak in the rate hiking cycle, others believe there will be one more hike in the coming months, while others are pricing in two more rate hikes on the basis of tight labour market conditions potentially feeding wages growth and keeping inflation higher for longer,” he said. “The range of cash rate forecasts reflects the sheer uncertainty in the economy.”
PropTrack senior economist Eleanor Creagh, said the decision allowed the RBA Board to take a ‘wait and see’ approach.
“This (decision) gives the RBA more time to assess the impact of rate rises already delivered on households, businesses, and economic conditions.”
The RBA Board will meet again in September, which will be Dr Lowe’s last meeting as governor. Michele Bullock will step into the role when Dr Lowe vacates the position on September 17.
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Strong rental fundamentals and tight supply have driven more than $155 million in Sydney apartment block and residential investment sales over the past year.
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Sydney’s residential investment market has recorded $155 million in apartment block and townhouse sales over 2025, underscoring continued investor confidence in rental-led assets despite broader economic uncertainty.
The transactions were completed by Knight Frank’s Investment Sales agents James Masselos and Adam Droubi, who negotiated 19 sales across Sydney during the year.
Residential investments accounted for 75 per cent of their total sales activity, supported by more than 4,200 active purchaser enquiries.
Co-living deal sets national benchmark
Among the standout transactions was the off-market sale of 142 Carillon Avenue in Newtown, a 37-studio co-living apartment block located close to the University of Sydney and Royal Prince Alfred Hospital.
The property sold for $21.5 million, setting a new benchmark for the living sectors market nationally.
The deal achieved approximately $581,000 per bedroom, believed to be one of the highest per-bedroom results recorded for a co-living asset in Australia.
Inner-city assets trade in one line
Other notable sales included a group of 12 townhouses at 108 Illawarra Road in Marrickville, sold in one line for $14 million, and a block of 20 studio apartments at 171 Rowntree Street in Birchgrove, which changed hands for $6.7 million.
Both transactions reflected strong buyer competition for well-located residential assets with established income streams.
Supply constraints underpin momentum
Mr Masselos said Sydney’s apartment block market continued to benefit from tight supply and strong rental conditions.
“Apartment blocks and broader residential investments remain a robust asset class, underpinned by strong rental growth, record low vacancy levels and scarcity of stock,” he said.
He added that more than $25 million worth of residential investment opportunities are expected to come to market in 2026, with buyer enquiry remaining elevated.
Mr Droubi said competitive sales campaigns had become a feature of the market as investors sought secure income and long-term value.
“Supply constraints and ongoing population growth underpin market strength,” he said. “New approvals and completions lag demand, keeping stock tight and boosting both rents and prices.”
Vacancy rates keep pressure on rents
According to Knight Frank, rental demand across Sydney remains intense, with vacancy rates well below typical “healthy” levels.
Many middle and outer-ring suburbs are recording vacancies of around 1.5 per cent or lower, maintaining upward pressure on rents and reinforcing the appeal of residential investment assets.
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