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.
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
The construction sector is roaring back to life in some Australian states while others languish in the doldrums
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The home building market is on the rebound as building approvals rise, new data reveals.
Information from the Australian Bureau of Statistics shows that the total number of dwellings approved in August was up 7 percent seasonally adjusted, with apartments leading the way.
Private sector house approvals gained 5.8 percent in August while private sector residences excluding houses were up 9.4 percent. This follows on from a decrease of 14.6 percent in July and indicates a solid recovery in the Australian construction sector as the end of the year approaches.
Approvals for total dwellings were strongest in the two largest states, with Victoria recording a rise of 22.2 percent and NSW 12.5 percent. Western Australia also saw a significant rise of 12.3 percent.
In Queensland, the results were less positive for the sector, with total dwelling approvals falling by -26.9 percent. Tasmania also experienced a drop in approvals in August, down -10.1 percent and South Australia -6.9 percent.
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
