By Graeme Salt
Today, the Reserve Bank Governor said, “it does look like additional cuts are not needed”. She also stated that the Reserve Bank Board was not expecting inflation to come back below three for another 12 months.
With no cuts expected for “the foreseeable future” this means rates are either going to hold steady, or increase, in 2026.
Many economists are now predicting rate rises toward the end of next year.
This is a remarkable turnaround from a position a few months ago. As early as April, markets had expected the RBA’s cash rate to reach 2.7 per whereas the RBA is now holding rates are 3.6 per cent!
In the month since the RBA’s last meeting on November 4, annual headline inflation rose to 3.8 per cent, the unemployment rate dropped to 4.3 per cent, household spending grew at the fastest pace in two years and growth crept up to 2.1 per cent off the back of a data centre investment boom.
However, at her media conference, Governor Bullock emphasised that she was not going to rush into decisions. There may be two good reasons for this:
- The Reserve Bank is using new calculations on inflation and it will take them some time to be able to read them
- It appears that the federal government plans to wind back some government spending
In this heightened environment, it is likely that a cap will be placed on most of the property market as Australians become more cautious in their spending habits.
For those who can afford it, this may present a good time to buy; with markets likely pausing for breath, there will be less competition for properties – and less likelihood of prices going crazy.
Graeme Salt is an award-winning mortgage broker. For a no obligations consultation on your borrowing needs, please contact him on 02 9922 5055
