RBA Holds Rates Steady Amid Rising Inflation and Uncertain Outlook
The Reserve Bank of Australia has once again decided to keep interest rates on hold at 3.6%, and while that might sound like a relief for mortgage holders, the story behind it isn’t exactly comforting. In fact, the RBA’s latest outlook suggests Australians may have to brace for more cost-of-living pain and, possibly, no more rate cuts on the horizon.
According to the central bank’s latest Statement on Monetary Policy, Australia’s economy is expected to grow steadily at about 2% per year. That’s the good part — a relatively stable growth rate driven by a continuing push in housing investment. Governments across federal, state, and territory levels are still targeting an ambitious 1.2 million new homes by the end of the decade, a number many experts consider unrealistic.
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The jobs market, too, appears steady on paper. The RBA expects unemployment to remain just below 4.5% for the next two years, though some economists say that forecast might be too optimistic. Productivity levels are also showing a modest improvement — a positive sign, even if still far from strong by historical standards.
But here’s where the concern grows. Despite stable growth and employment, wage increases aren’t keeping up with rising prices. Inflation remains stubbornly high, and the RBA admitted that the September quarter’s figures were “notably higher than expected.” The central bank now expects inflation to peak at around 3.7% by mid-next year, well above the comfort zone of 2–3%. For many Australians, that means another year of losing purchasing power, as wage growth is forecast to remain below inflation.
RBA Governor Michele Bullock acknowledged the uncertainty, saying it’s possible there will be no further rate cuts — and equally possible there could be more. But with inflation proving sticky and the economy operating near capacity, most analysts believe the next move could actually be a rate hike, though likely not until 2027.
Market expectations have shifted dramatically too. Earlier forecasts of multiple rate cuts have been scaled back, and now the cash rate is only expected to dip slightly to 3.3% next year. In simple terms, borrowers shouldn’t expect much relief anytime soon. Even with the current rate, competitive mortgage pricing has softened the blow somewhat, but experts warn these favorable spreads might not last long.
In the big picture, the RBA is walking a fine line — trying to cool inflation without derailing the economy. For Australian households, that means the squeeze on budgets is far from over. Mortgage holders, renters, and everyday consumers will likely need to hang tight, as meaningful rate relief may still be more than a year away.
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