RBA holds as speculation mounts the rate hiking cycle has peaked

September 8, 2023

With inflation easing more rapidly than forecast, signs the labour market is loosening and a pullback in spending from households, the RBA’s decision to keep the cash rate on hold at 4.1% was widely anticipated.

1b

This was the third month in a row where the RBA board kept the cash rate steady; with key economic indicators softening over recent months there is mounting speculation the rate hiking cycle peaked in June.

The RBA was clear that inflationary pressures, especially in the services sector, remain elevated, but the trend is heading in the right direction and the RBA remains confident inflation will return to the target range in late 2025.  The monthly Consumer Price Index (CPI) indicator showed a further easing in the headline inflation rate, recorded at 4.9% in the 12 months to July, down from 5.4% in the year to June and 8.2% over the 2022 calendar year.

CPI rents, which are allocated the second largest weighting within the CPI ‘basket’, remain a major inflationary driver, with the monthly CPI indicator reporting a 7.6% rise in the cost of rents in the year to July, accelerating from 7.3% in June.  The trend indicates no slowdown in growth for rents paid. Although CoreLogic’s timelier rental index has recorded a fourth consecutive month of slowing rental growth, CPI rents show around an 18-month lag, suggesting rental prices are likely to add to inflationary pressures for some time yet.

It may be too soon for a pause in the cash rate to have a significant impact on purchasing demand. Although housing values have trended higher in the past few months, the recovery trend is occurring across volume that remains slightly below the five-year average.  A more robust recovery in housing market activity is likely to be constrained by high interest rates and affordability hurdles in the short-term.

Additionally, consumer sentiment, which shows a close relationship with the volume of home sales, has held close to recessionary lows for almost a year.  A material rise in dwelling sales is unlikely until we see a lift in consumer spirits.  If we see a growing expectation that interest rates have peaked, alongside lower cost of living pressures, sentiment measures are likely to rise, but confidence has a long way to recover before getting back to a neutral setting.

A recent rise in new listings activity may also test buyer demand, and lead to milder growth in housing values, towards the end of 2023. While a pause in the cash rate may gradually instill more confidence in the market, this is still very much an uncertain and thinly traded upswing.

 

Source: corelogic.com.au

You might be also interested in

Gettyimages 2006354243
Federal Budget 2024: $6.2b housing splash
The federal government has unveiled $6.2 billion in new housing spending in this year’s budget, with a major focus on housing for Aussies doing it tough. With near record low
VIEW POST
Money 7864149cfb2
Federal Budget 2024: How this year’s budget tackles the rising cost of living
Tax cuts, energy bill relief and rent assistance are among the measures in this year’s federal budget aimed at bringing down the rising cost of living. Federal treasurer Jim Chalmers
VIEW POST
Gettyimages 622528618
Is the mortgage loyalty tax a thing of the past?
New and existing home loan customers are now paying almost the same interest rates, with the difference shrinking to the smallest it’s been in the past five years. Since the
VIEW POST
West Hoxton
Budget 2024: The roads, rail and regional hotspots getting billions
The 2024 federal budget has unveiled a range of initiatives aimed at tackling Australia’s housing issues head-on, but it’s also provided billions of dollars to build more infrastructure across the
VIEW POST
Capi 1e0e766d2d5233a56cca5d4cd86b5710 09df85bc29deb103c8cadb5a2c2c7897
Cost of living: underinsurance effects 200,000 Aussies
Rising costs and affordability challenges has pushed Australia into an underinsurance crisis, which could cost homeowners hundreds of thousands of dollars when faced with disaster. In Australia, 13.1 million homeowners
VIEW POST
Gettyimages 908296490 88041054c55
Biggest surprises of Australia’s rental market revealed
In some parts of Australia, rents are bafflingly high, while in others, they’re surprisingly affordable. In some cities, it’s the areas you’d least expect that are showing the highest rental
VIEW POST
123
Higher for longer? The new cash rate paradigm
Research Director Tim Lawless unpacks what today’s cash rate decision means for the housing market. The interest rate outlook has changed remarkably in a short space of time. It was
VIEW POST
Capi Eaca2a4a670f7182c240bbb3ada7028a Dde6cc44b571f6374cf0e9f8edab769b
Rent crisis: Vast majority of Victoria now home to ‘extreme rental pain’, but silver lining for Docklands
More than three-quarters of Victoria is now in extreme rental pain after the state notched the second-fastest rent rises in the country across the past year. But there are signs
VIEW POST
Frankston 913595467e9
Why now is the time to invest in this unloved state, and where to buy
Victoria’s property investment prospects remain strong despite prices going backwards and an ‘outrageous cash grab’ by the state government that has prompted many investors to flee, according to property experts.
VIEW POST
Gettyimages 1222002808
Are higher interest rates forcing investors to sell up?
More landlords in Melbourne and Sydney are selling off their investment properties compared to a year ago, new research suggests. PropTrack data shows the estimated share of home sales in
VIEW POST

Get your Free Property Guide.

Here goes your text ... Select any part of your text to access the formatting toolbar.

Get your free Sales Report for RBA holds as speculation mounts the rate hiking cycle has peaked

Get your free Sales Report for RBA holds as speculation mounts the rate hiking cycle has peaked

Subscribe to hear the latest

Start The Conversation Today.

Call us on:

1300 850 730

Request a Callback:

Send us a Message:

Privacy Policy

Get your Free Property Guide

Get your free Suburb Report for RBA holds as speculation mounts the rate hiking cycle has peaked

Privacy Policy

Who we are

Suggested text: Our website address is: https://motionproperty.com.au.

Comments

Suggested text: When visitors leave comments on the site we collect the data shown in the comments form, and also the visitor’s IP address and browser user agent string to help spam detection.

An anonymized string created from your email address (also called a hash) may be provided to the Gravatar service to see if you are using it. The Gravatar service privacy policy is available here: https://automattic.com/privacy/. After approval of your comment, your profile picture is visible to the public in the context of your comment.

Media

Suggested text: If you upload images to the website, you should avoid uploading images with embedded location data (EXIF GPS) included. Visitors to the website can download and extract any location data from images on the website.

Cookies

Suggested text: If you leave a comment on our site you may opt-in to saving your name, email address and website in cookies. These are for your convenience so that you do not have to fill in your details again when you leave another comment. These cookies will last for one year.

If you visit our login page, we will set a temporary cookie to determine if your browser accepts cookies. This cookie contains no personal data and is discarded when you close your browser.

When you log in, we will also set up several cookies to save your login information and your screen display choices. Login cookies last for two days, and screen options cookies last for a year. If you select “Remember Me”, your login will persist for two weeks. If you log out of your account, the login cookies will be removed.

If you edit or publish an article, an additional cookie will be saved in your browser. This cookie includes no personal data and simply indicates the post ID of the article you just edited. It expires after 1 day.

Embedded content from other websites

Suggested text: Articles on this site may include embedded content (e.g. videos, images, articles, etc.). Embedded content from other websites behaves in the exact same way as if the visitor has visited the other website.

These websites may collect data about you, use cookies, embed additional third-party tracking, and monitor your interaction with that embedded content, including tracking your interaction with the embedded content if you have an account and are logged in to that website.

Who we share your data with

Suggested text: If you request a password reset, your IP address will be included in the reset email.

How long we retain your data

Suggested text: If you leave a comment, the comment and its metadata are retained indefinitely. This is so we can recognize and approve any follow-up comments automatically instead of holding them in a moderation queue.

For users that register on our website (if any), we also store the personal information they provide in their user profile. All users can see, edit, or delete their personal information at any time (except they cannot change their username). Website administrators can also see and edit that information.

What rights you have over your data

Suggested text: If you have an account on this site, or have left comments, you can request to receive an exported file of the personal data we hold about you, including any data you have provided to us. You can also request that we erase any personal data we hold about you. This does not include any data we are obliged to keep for administrative, legal, or security purposes.

Where your data is sent

Suggested text: Visitor comments may be checked through an automated spam detection service.

Get your Free PDF copy of Make Money Simple Again