Is the end of the tightening cycle near?


The Reserve Bank of Australia (RBA) has kept its interest rates at 4.1% for a second consecutive month, signalling a potential pause in its rate-hiking cycle.

RBA Governor Philip Lowe believes that the elevated interest rates are facilitating economic stability, and with inflation declining more rapidly than anticipated, the RBA’s revised forecasts point to a gradual return to the target range of 2-3% by late 2025. Economist Eleanor Creagh views this as easing pressure on the RBA, granting a window to examine the economic scenario and guide inflation back within target. While the RBA hasn’t closed the door on future rate hikes, achieving the inflation target is its immediate focus, especially amidst certain uncertainties.

Michele Bullock, first female RBA governor
Team doing a review

In the housing market, Australian home values have climbed for the seventh straight month in July, marking a 1.36% increase from the previous year, according to the latest PropTrack Home Price Index. The belief that interest rates might have reached their peak is boosting confidence in the real estate market, setting the stage for a robust spring selling season, notes economist Ms Creagh. The resilience of housing demand and a scarcity of new listings have counteracted substantial interest rate rises since May 2022. Most major cities, apart from Darwin and Canberra, saw price growth in July. Adelaide led the pack with a 0.62% increase, hitting a record $676,000, while Sydney and Melbourne also posted modest gains. Some cities have achieved new all-time highs, although Melbourne’s home prices remain 4.91% below their March 2022 peak and 1.3% down year-on-year, and Hobart’s prices, despite increasing 0.21% in July, are still 6.6% lower than their March 2022 peak, though they have significantly grown since March 2020.

Even in the traditionally slower winter season, the property market is witnessing a spike in demand and a limited supply, favouring sellers for the forthcoming spring season. Ms Creagh emphasises that intensified buyer interest, spurred by limited new listings, is fuelling strong competition and ongoing price growth. After seven months of climbing prices, previously reluctant buyers are entering the market, showing renewed confidence as evident in increased sales volumes and vigorous auction activity. Buyers and sellers are responding to recent market trends, with buyers taking comfort in economic stability, low jobless rates, and signs that the interest rate hike cycle may be close to its zenith. This renewed assurance is likely to sustain the positive trajectory in home values this spring, leading to more markets registering annual price growth.

Speculation over whether interest rates have reached their summit is ignited by the RBA’s decision to maintain rates at 4.1% since June 2023. The financial markets are inclined to think the cash rate has hit its maximum, but economists’ opinions vary. ANZ envisions an extended pause until late 2024, possibly followed by rate reductions, while Westpac and CBA anticipate a final hike in August, peaking at 4.35%. NAB doesn’t discount further increases but foresees major cuts from mid-next year, possibly bringing the cash rate to 3.1% by December 2024. In this fluctuating interest rate environment, mortgage brokers are counselling borrowers to carefully explore their options.


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