- Another 25 basis points has been added to interest rates
- The last rate rise was February, where 25 basis points were also added
- This is the tenth consecutive rate rise since the rate rises began in May 2022
The Reserve Bank of Australia (RBA) has announced the tenth consecutive rate rise since May 2022.
Today’s meeting of the Reserve Bank has seen the cash rate target increase by 25 basis points to 3.60%.
In a statement, RBA Governor Phillip Lowe said he expects inflation to be above target rates for “some time”.
“Global inflation remains very high. In headline terms, it is moderating, although services price inflation remains elevated in many economies. It will be some time before inflation is back to target rates. The outlook for the global economy remains subdued, with below average growth expected this year and next,” he said.
“The monthly CPI indicator suggests that inflation has peaked in Australia. Goods price inflation is expected to moderate over the months ahead due to both global developments and softer demand in Australia. Services price inflation remains high, with strong demand for some services over the summer,” Lowe added.
Lowe has indicated that there may be a light at the end of the inflation tunnel.
“The central forecast is for inflation to decline this year and next, to be around 3 per cent in mid-2025. Medium-term inflation expectations remain well anchored, and it is important that this remains the case,” he said.
Property industry responds
The move was widely expected, with the industry response ranging from unphased to disappointed.
Peter Li, General Manager of the Sydney and Shanghai real estate agency, Plus Agency, said: “It was expected, and buyers expect another increase in three months. If it had been 0.5%, that would have had an impact, but this 0.25% increase is not scaring any one out of the market. If they were buying, they are still buying. If there weren’t, they still aren’t.”
On the foreign buyer front, Juwai IQI Co-Founder and Group Managing Director Daniel Ho said: “Foreign buyers who finance their purchase in Australia already typically pay a significantly higher rate than domestic buyers, so rate increases can hit them harder. Even so, this rate increase is a surprise to no one. A 0.25% increase might push a monthly principal plus interest mortgage with a balance of $800,000 payment up by $135. But your mortgage only has to fall in value by $10,000 to $20,000 to counteract this increase.”
Master Builders Australia (MBA)
The industry body’s CEO, Denita Wawn said “The building and construction industry acknowledges the Reserve Bank of Australia’s difficult decision to raise interest rates today but warns that without other fiscal and policy measures to control inflation, further interest rate rises would leave the industry and homeowners bearing the brunt of the current economic challenge.”
MBA also noted in its statement that, “rising inflation and interest rates have already forced building and construction activity to slow sharply making it much harder to deliver the housing and infrastructure needs for Australians. Today’s RBA statement notes how accelerating rental prices are already contributing to inflationary pressures across the economy. Further interest rate increases will deepen the new home building downturn and magnify these rental market pressures.”
The industry body said it recognises the likely need to continue lifting interest rates over the next few months, but is calling for interest rate increases to either be paused in April, or consider smaller rises of no more than 10 to 15 basis points.
Zippy Financial
The company’s financial director and principal broker, Louisa Sanghera, said “Today’s 25 basis point cash rate increase was widely expected by the market but there are growing concerns that the RBA has potentially already gone too far.”
“The latest cash rate hike – the 10th consecutive increase since May last year – has pushed interest rates to their highest level in more than a decade.
“However, a number of economic indicators have started to skew softer, with rising unemployment, underwhelming wages growth and GDP, plus, home lending finance has fallen by a staggering 35 per cent in the past year.
“While it is economically prudent for inflation to be curtailed, the Reserve appears to have taken a sledge-hammer approach, rather than showing a modicum of patience – even for a month or two – after February’s rate hike to analyse the impact of higher rates on consumer spending and the wider economy.
“The consensus amongst economists is that the cash rate may have already been pushed too far, but it appears that possibility – as well as the pain being felt by mortgage holders – is falling on deaf ears at the Reserve Bank board table.”
Canstar crunches the numbers
The company said borrowers are coming to terms with a 50% increase in repayments since April 2022 and will need to work the equivalent of an extra 29 hours per month to keep pace with repayments.
Canstar’s Editor-at-Large and money expert, Effie Zahos says if you are struggling to keep up with your repayments already, it may be a matter of trying to stick it out until rates start falling again – which may be sooner than you think.
Calls for government to help with renters
Everybody’s Home spokesperson Maiy Azize said that Australians are spending more and more on housing, and called on the Government to step up and fund more social housing.
“Rising interest rates are hurting everyone. Rents are soaring, and people are spending more and more on housing,” Ms Azize said.
“Renters are at the bottom of the ladder. Not only are they dealing with record high rents, but they are missing out on badly needed help as billions of dollars are spent on tax handouts for landlords.
“Many are forced to accept rent increases and have nowhere to turn. With low vacancy rates across the country, finding another rental is not an option. And with a shortfall of 500,000 social homes, struggling renters are simply trapped.
“It’s time for the Government to step up and take action. The billions of dollars we spend propping up landlords would be better spent helping struggling renters, and building more social homes.”
Everybody’s Home is calling for the Federal Government to build more social homes each year.
