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A Moment Of Pause for the RBA
By: James Holvander
July 04, 2023

For only the second time in the past 14 meetings the Reserve Bank of Australia has decided to leave interest rates on hold, keeping the cash rate at 4.10%. 

The RBA governor, Philip Lowe, explained that it was an opportunity for the bank to assess the continued impact of the four percentage
point hikes prior to making further decisions, saying that the current higher interest rates were working to establish a more sustainable balance between supply and demand in the economy. He added,  “In light of this, and the uncertainty surrounding the economic outlook, the board decided to hold interest rates steady this month”. 

With the release of the monthly consumers index from the Australian Bureau of Statistics showing headline inflation was in retreat,
falling sharply to 5.6% in May – making it officially the lowest in over a year – there’s no doubt these figures played into the RBA’s decision to pause. Governor Lowe did say that the RBA board would be watching global economic developments and trends in household spending given that underlying inflation had only just edged lower. 

Yet despite the high interest rate environment, the property  sector continues to face an under supply at present which will continue to
provide some support for house values. According to CoreLogic “The number of capital city homes advertised for sale is tracking about 26% below the previous five-year average and dwelling approvals continue to trend well below average levels.” These conditions in tandem with record net migration and what are extremely tight rental conditions will continue to offset some of the impact of higher interest rates on the housing sector. 

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Written by
James Holvander
James began his career in finance and funds management before seizing an opportunity to enter the real estate industry in 2002....
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