The Reserve Bank of Australia has announced its decision on the final cash rate for 2023. In the last monetary policy meeting of the year, the RBA chose to maintain the cash rate at 4.35 per cent, marking the sixth hold for the year.
RBA Governor Michelle Bullock, in response to the decision, emphasized the positive impact of higher interest rates in establishing a sustainable balance between aggregate supply and demand in the economy. She noted that the effects of recent rate increases, including those from the previous month, will continue to permeate the economy.
The decision to keep the cash rate steady allows for a comprehensive assessment of the impact of interest rate hikes on demand, inflation, and the labor market. Governor Bullock acknowledged the existing uncertainties in the economic outlook, citing persistent services price inflation despite positive signs in goods inflation globally.
Ms. Bullock stated, “Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks.”
Reacting to the decision, Mortgage Choice CEO Anthony Waldron expressed relief among Australian borrowers. He mentioned that the unchanged cash rate provides some breathing room for households, particularly in the expensive holiday season. However, Waldron cautioned that despite easing inflationary pressure, the RBA had indicated in its November minutes that further rate rises could still be on the horizon.
Waldron encouraged borrowers to review their home loans for competitiveness as the year concludes. He suggested that those planning to buy or upgrade in 2024 should consider initiating their home loan applications, seeking guidance from brokers to understand borrowing power and available loan options.
Executive director of aggregator Connective, Mark Haron, urged brokers to demonstrate their value as partners to clients as the year ends. Haron noted that this decision presents an opportunity for borrowers to review and potentially change their financial situations, especially those considering shifts from fixed-rate to variable loans.
Aggregator LMG’s executive chairman, Sam White, described the decision to hold as a “welcome reprieve” for borrowers entering the holiday season. He acknowledged the uncertainty still present but highlighted the stability window until the RBA’s next meeting in February, potentially extending into 2024. White anticipated a busy first half of 2024 for brokers, emphasizing the increasing importance of post-settlement care.
The moderation in the Consumer Price Index (CPI) data for October, dropping to 4.9 per cent from 5.6 per cent in September, influenced expectations of a cash rate hold. Industry experts suggested that this decline provided no justification for a rate increase in December. Brokers anticipated a busier start to 2024, particularly in post-settlement care, with the annual CPI heading in a positive direction.
In summary, the RBA’s decision to maintain the cash rate brings relief to borrowers, and industry experts predict increased activity in the mortgage market in the coming months, driven by factors such as CPI moderation and ongoing economic uncertainties. Borrowers are advised to stay vigilant and consult with brokers to navigate the evolving financial landscape.