Interest rates hold for April following RBA meeting
It’s welcome news for mortgage holders amid cost of living pressures
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The RBA has decided to keep interest rates on hold following a meeting of the board this afternoon. In a widely anticipated move and amid growing pressure from government and key players in the housing sector, the Reserve Bank of Australia has broken a 10-month streak of consecutive rises in the cash rate, leaving interest rates at 3.6 percent.
In a statement released earlier today, governor of monetary policy at the RBA, Philip Lowe, reaffirmed last month’s assertion that ‘monetary policy operates at a lag’ but said it was likely that inflation in Australia has already peaked, with further falls expected over the course of this year and next.
Inflation hit a high of 8.4 percent in December 2022 but fell slightly in January to 7.4 percent and again in February to 6.8 percent.
“Goods price inflation is expected to moderate over the months ahead due to global developments and softer demand in Australia,” Mr Lowe said in a statement.
“Meanwhile, rents are increasing at the fastest rate in some years, with vacancy rates low in many parts of the country. The prices of utilities are also rising quickly.
“The central forecast is for inflation to decline this year and next, to around 3 percent in mid-2025. Medium-term inflation expectations remain well anchored, and it is important that this remains the case.”
The news has been received positively by the building and property sectors.
Master Builders Australia CEO Denita Wawn said the decision to pause a further rise was welcome.
“Interest rate rises coupled with rising inflation have forced building and construction activity and new homes sales to slow sharply over the last few months,” she said in a statement.
“A strong building industry is the foundation of a strong economy. The close interdependence between the health of the construction industry and the economy’s fate is clear to see in the current environment.
“The RBA has rightfully recognised the negative impacts of rapidly rising interest rates on accelerating rental prices and construction activity.”
CoreLogic research director, Tim Lawless, said the decision would boost confidence in the property market ahead of further falls in the rate of inflation.
“An increased level of certainty around the rate hiking cycle should flow through to an improvement in consumer sentiment, which has been stuck at levels seen during the worst of the Global Financial Crisis and early phase of the pandemic,” he said.
“We know that consumer sentiment and housing market activity have a close relationship, so any upwards movement in spirits could see more buyers and sellers returning to the market, although we would need to see sentiment lift materially before returning to average levels.”
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The recent budget has forced a reckoning for property investors.
Negative gearing now restricted to new residential builds, the CGT discount gone and on paper, the numbers look different.
And many investors are responding by pivoting toward yield, prioritising cash flow over capital growth in a way that property strategists say misses the point entirely.
“The debate has shifted to yield versus growth as if they are opposing forces,” says Abdullah Nouh, founder of Melbourne-based buyers’ agency Mecca Property Group. “But that framing is itself the mistake.”
Nouh, who works with high-net-worth families and investors on long-term acquisition strategy, argues that capital growth remains the primary driver of genuine wealth creation and that the post-budget environment has made quality assets more important, not less.
The numbers make his case plainly. An additional $500 per week in rental income is welcome. A prestige asset appreciating by $1 million over a market cycle is transformative.
These are not equivalent outcomes, and portfolios built around yield at the expense of location and land value tend to generate income while wealth stands largely still.
The more nuanced shift Nouh is seeing among sophisticated investors is a move toward assets where both outcomes can be engineered simultaneously – established homes on substantial land in quality locations, where the existing dwelling can be repositioned, rental returns improved, and the underlying land value compounds independent of what sits on it.
For investors with existing equity, commercial property is also entering the conversation in a more serious way.
Prestige industrial assets, medical centres and long-leased essential retail offer income profiles that residential property in most capital city markets cannot currently match: longer lease terms, tenants covering outgoings, and greater predictability than the residential tenancy cycle.
“The investors who build lasting wealth are rarely the ones who chased yield or growth exclusively,” says Nouh.
“They are the ones who built a strategy they could sustain – one that generated enough income to hold quality assets through multiple cycles while those assets compounded in value.”
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