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RBA interest rates: Bleak inflation warning for struggling homeowners, cash rate held for fifth consecutive meeting

RBA governor Michele Bullock has explained the board's decision to hold the cash rate at 4.35 per. cent.

Yahoo Finance's live blog this Tuesday covering the RBA's interest rate decision has concluded. Governor Michele Bullock has confirmed the interest rate remains at 4.35 per cent with a fifth consecutive hold. The cash rate continues to punish homeowners and Australians are growing increasingly restless over the varying predictions about what will happen moving forward.

The big banks are retreating from their original predictions for a first drop, with one pushing it back to 2025 and some experts are even suggesting good news will only come towards the end of that year.

The RBA believes it will be "some time yet" until inflation is where they want it to be, which does not sound good for mortgage holders. Read more below.

  • Prediction cuts are a long way off

    Yahoo Finance contributor and businessman Mark Bouris says he's not seeing any "good, solid indications" interest rates will be reduced by the RBA in the near future.

    "So I'd say right now, given what the RBA rhetoric was on today's announcement, interest rates will stay where they are for a fairly long time," he said.

  • Boomers' spending questioned after cash rate call

    Boomers have been copping it a bit during this period of high inflation and the AFR's editor-in-chief Michael Stutchbury couldn't let Bullock go without pressing her on their spending.

    He asked if inflation continued to remain sticky towards the end of the year, would she ask older Australians to "not spend as much".

    In an unsurprisingly diplomatic answer, Michele Bullock said it wasn't "as easy as that".

    "We're in quite a complex situation here.. it's a challenging time because we're balancing risks on both sides.

  • Silver lining as RBA didn't even consider a cut

    The central bank didn’t even consider a rate cut this month.

    It’s not the news borrowers want, but a reality they are going to have to come to term with.

    Bullock rolled out the classic “not ruling anything in and not ruling anything out” line.

    But dished out a glimmer of hope.

    “I wouldn't say that the case for a rate rise is increasing,” the governor said.

  • War on inflation far from over

    RBA governor Michele Bullock has admitted the war on inflation is far from over.

    She said “people are really hurting, they’re not saving as much and they are really hurting”.

    But, that Australia was in no different situation than the rest of the world.

    “We still think we're on the narrow path but it does appear to be getting a bit narrower. We need a lot to go our way if we're going to bring inflation back down to the 2 per cent target range.”

    The RBA earlier said it would be "some time yet before inflation is sustainably in the target range".

    Michelle Bullock addressing reporters on Tuesday. Source: ABC
    Michelle Bullock addressing reporters on Tuesday. Source: ABC
  • Rate rise was considered

    RBA governor Michele Bullock is facing questions from the media, and started by saying "we're at a really complex part of the cycle at the moment".

    She said they did consider raising the cash rate, however ultimately decided against it.

    "In the end, [the board] decided that its current strategy of staying the course and trying to bring inflation back down by bringing supply back to demand was the right way to go," Bullock said.

  • Homeowners should keep an eye on New Zealand

    The US Federal Reserve made a big move this week. It reduced the number of projected interest rate cuts from three to one.

    Now, that is something the RBA board would have discussed over the last two days while determining where our rates are headed.

    But, finance expert David Koch told Yahoo Finance there’s a better interest rate cut sign to watch for, one much closer to home.

    “If New Zealand were to drop their cash rate, we might follow suit,” the Compare the Market economic director said.

    “But we need to look inward at our own data first. Once inflation was stripped out, Australia's Gross Domestic Product per capita fell 0.4 per cent in the March quarter and was down 1.3 per cent this year.”

    David Koch housing
    David Koch housing (Yahoo Finance Australia)
  • Grim message in RBA statement

    Well this doesn't look too good.

    In the cash rate decision statement, the RBA has warned it will be "some time yet" until inflation is where they want it.

    "Inflation is easing but has been doing so more slowly than previously expected and it remains high," the statement said.

    "The Board expects that it will be some time yet before inflation is sustainably in the target range. While recent data have been mixed, they have reinforced the need to remain vigilant to upside risks to inflation."

    Judging by that, it'd be fair to say a cut probably won't be on the RBA's radar anytime soon.

  • RBA holds cash rate at 4.35

    The RBA has held the cash rate at 4.35 per cent for the fifth consecutive meeting.

    Governor Michele Bullock will front the media later this afternoon, and will undoubtedly address the concerns of struggling mortgage holders across the country.

    The rate will stay at 4.35 for at least two months with the next RBA meeting to be held in August.

  • Michele Bullock's last cash rate claim a point of contention

    We're just half an hour away from another cash rate announcement from the RBA and Yahoo Finance expert The Kouk appears fed up with the glass half-empty mentality from some publications.

    While there's been plenty of talk about a possible rate hike in the coming months, he stresses it could easily go the other way.

  • NSW treasurer worried about inflation

    NSW Treasurer Daniel Mookhey has warned the state there'll be little cost-of-living relief handed out in the state's budget today because of concerns it could send inflation climbing.

    It comes after the Federal Budget was delivered last month with handouts for Aussies criticised by some experts who fear they will hamper the RBA's efforts to bring inflation down.

    Find out the biggest winners and losers from the NSW budget here.

  • Dire consequence of cash boosts

    Most Aussies would’ve been stoked when they heard there would be a little more money in their pockets after the Federal Budget was announced.

    Every Aussie household will get a $300 energy rebate and every worker will get a pay rise when the Stage 3 tax cuts come in on July 1.

    But have you considered how these will impact interest rates?

    Economists have. Harry Murphy Cruise, from Moody's Analytics, is part of the two thirds interviewed by Finder who think the budget could push up inflation.

    The government said paying the energy rebate directly to providers, instead of as a cash handout, meant they would help bring inflation down.

    But Murphy Cruise said that’s a gamble.

    “It will all depend on how much of the energy rebates gets spent, and how much gets squirrelled away into savings," he said.

    "If they're spent, it would add to demand at the exact same time the RBA is trying to take it out, adding to underlying inflation even if the headline figure comes down.

    "What’s more, the rebate comes at the same time as a slew of similar rebates from state governments and the reworked stage-three tax cuts, which are set to hand the average worker a tax reduction of $1,500.

    "All that will ensure the RBA stays put for a little longer; its next move will be down, but we’ll have to wait a little longer.”

  • Economist sticks with grim double rate hike prediction

    While we're not expecting a rate rise today, economist Warren Hogan remains confident the RBA will hike the interest rate more than once before the end of the year.

    Judo Bank's chief economic adviser believes the RBA will be questioning whether the cash rate high enough to bring inflation back down to the target range of 2 to 3 per cent in 2025.

    “The evidence building since they last met is getting worse for that view,” he told the Daily Telegraph.

    Hogan believes the RBA will deliver hikes in August and November. Not the sort of prediction millions of homeowners were hoping for.

    Warren Hogan has predicted the RBA could lift interest rates three times this year to 5.1 per cent. (Source: LinkedIn/Getty)
    Warren Hogan remains confident multiple hikes will happen this year. Source: LinkedIn/Getty
  • Brutal reality facing Aussies in just 10 years

    Want to buy in a capital city? Economists fear that won't be possible for Australians within 20 years, unless they land a substantial inheritance or get a leg up from the bank of mum and dad.

    “It’s difficult to see how the average income earner will be able to afford a home in 10 years if prices continue to increase at their current rates compared to wages, let alone 20," Finder head of research Graham Cooke said.

    ATO data released this week put the average annual income at $72,327, while the median (which strips out very high and low earners) was $53,041.

    That makes recent research on how much you'd need to earn to afford a home without plunging into mortgage stress even more concerning. You can read more about that here, but these are the annual wages needed to buy in our capital cities.

    Sydney: $293,578

    Melbourne: $189,962

    Adelaide: $163,627

    Brisbane: $178,090

    Canberra: $205,073

    Hobart: $148,948

    Perth: $140,313

    Darwin: $124,339

    We’ve also seen fresh research from the Compare Club today that shows 80 per cent of Australians are facing extreme bill stress, which has forced half of them to cut back on essentials like groceries.

    More struggling households are relying on problematic buy-now-pay-later services to “conserve cash for bills”, with a 28 per cent surge in use.

    So it begs the wider question, in this current climate, how much do you think you’d need to earn to get by?

  • The Kouk dismisses 'bluster' about rate hike

    Yahoo Finance contributor Stephen Koukoulas said there’s “zero chance” of an interest rate hike today, “despite the bluster”.

    The markets are priced for two 25 basis point cuts by late 2025, which he said is a far cry from the calls for three hikes this year following the March quarter CPI numbers.

    “These interest rate hike forecasts are turning into a widow maker.”

    Here’s what he's got to say ahead of today’s decision.

    A lot has happened since the last RBA meeting.

    We’ve had disappointing GDP numbers that showed inflation ticked up.

    Last week, the US Federal Reserve left interest rates steady but they still anticipate lower rates later rather than sooner. That’s an important indicator for us.

    All of these things will go to the analysis the central bank will put out today at 2.30pm, and the questions that I’m sure Michelle Bullock will get at the press conference after.

    Just how weak will the economy be before we get unemployment going up, before inflation comes down?

    So that wonderful linkage between different parts of the economy will be what economists like me are looking at for clues on whether rates are going down, up or will remain steady for another few months. Plus when and how much they might change by.

  • Aussies left in despair as narrative quickly changes

    Struggling Aussies are becoming increasingly frustrated as the mood has quickly shifted from hope to despair.

    Reacting to predictions a cut will come mid-2025 and onwards, mortgage broker and homeowner Maddie Walton says she's fed up with being unable to save a cent, and worried even more bad news could come.

    "I don't think a rate rise this year is out of the question," she told Yahoo Finance. "I just think there'll be a massive uproar with how much mortgage holders are struggling.

    "I don't even have any money to spare as it is so it would be more cutting into savings if anything."

    Homeowner and mortgage broker Maddie Walton said Aussies are already being pushed to the brink with interest rates and an increase would cause a 'massive uproar'. (Source: Supplied/Getty)
    Homeowner and mortgage broker Maddie Walton said Aussies are already being pushed to the brink with interest rates and an increase would cause a 'massive uproar'. (Source: Supplied/Getty)
  • How far have rates climbed in the last two years?

    April 2022 marked the start of a brutal period for Australian mortgage holders, who have seen the interest rate jump to 4.35 per cent.

    Most of the damage was done in the first 12 months that followed that initial rise, with several holds and a sprinkling of rises since then.

  • How far do the banks think interest rates will drop over the next two years?

    Once rates do finally drop, the big question is how far will they fall?

    ANZ is the only outlier, predicting just three cuts to bring the cash rate to 3.60 per cent.

    The other three think there will be five cuts, landing the cash rate at 3.10 per cent by December 2025.

    The difference in outcomes are huge for mortgage holders.

    RateCity has done an analysis based on a $500,000 loan with 25 years remaining.

    If ANZ is right, there will be a $223 drop in monthly repayments by December 2025. That would put a borrower’s interest repayments over the next 18 months at $45,120.

    If the others are right, that could be a $368 monthly saving, pushing the total interest paid to $43,576 over the same period.

    Just a couple digits change for forecasters, could be a $1,544 interest change for you.

  • When do the big four banks think interest rates will come down?

    Governor Michele Bullock said she “certainly didn’t give any impression” of an interest rate cut in 2024.

    But earlier this year, the big four banks were all predicting one for this year. Then, slowly, the dates started to push back. From September to November.

    Sadly, last week ANZ decided hope was lost for 2024. They don’t think interest rates will come down until February of next year.

    These adjustments don't tend to come all at once, but rather fall like dominoes as new financial data comes to light.

    Commonwealth Bank, Westpac and NAB could still change their predictions.

    Currently they still have November locked in as the first 25 basis point drop to the cash rate.

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