RBA keeps rates on hold amid softer inflation data, declining house prices

Data from the Australian Bureau of Statistics (ABS) indicated that headline inflation for the June quarter had eased to 3.8 per cent, down from 4 per cent, while trimmed mean inflation was flat at 3.6 per cent.
Both were below the RBA's expectations.

In addition to the inflation figures coming in lower than expected, economist Paul Eslake noted clear signs of an easing in the housing market and that the RBA now considers monetary policy settings restrictive, with the cash rate at 4.35 per cent.

AMP chief economist Shane Oliver agreed that slightly softer-than-expected underlying inflation for the June quarter, along with slightly weaker-than-expected labour and housing market conditions, had allowed the RBA to remain in "wait and see" mode this month and keep rates on hold.

However, with inflation still too high, Oliver said the RBA is likely to retain scope for further tightening.

University of Tasmania associate professor Mala Raghavan said the RBA also needed to consider a range of other factors, including heightened global economic uncertainty, stemming from geopolitical tensions, potential AI-related disruptions, and climate-related challenges in Europe.

Raghaven said these influences could weaken Australia's economic outlook, increase supply-side cost pressures, and contribute to a gradual easing of labour market conditions.

"These risks are likely to support a more cautious monetary policy stance," she said.

Accounting Home Loans director of sales Cullen Hayes noted that lender fixed-rate cuts also reflect expectations that rates will be lower down the track, with Macquarie recently cutting rates by 5 basis points on its variable products.

Hayes said that property prices were already softening, with Cotality's national Home Value Index falling 0.4 per cent in June, the sharpest monthly drop since December 2022 and the third straight monthly fall, with the June quarter down 1.3 per cent across the combined capitals.

"The average residential rate we're seeing sits between 5.9 and 6.5 per cent depending on whether it is an owner-occupier loan or investment loan," he said.

Hayes said borrowers who are concerned about their current rate should contact a mortgage broker to review their position.