Reserve Bank holds cash rate steady in March

March 19, 2024

As widely predicted, at today’s March monetary policy meeting the Reserve Bank of Australia (RBA) held the nation’s official cash rate steady at 4.35%.  

Speaking about the decision, Mortgage Choice CEO, Anthony Waldron commented, “Given the latest economic data, it’s unsurprising that the RBA decided to keep the cash rate on hold. The economy is slowing, annual inflation is at the lowest level seen since November 2021, and households are cutting back on spending, suggesting that high interest rates are having the intended effect.” 

Data from the Australian Bureau of Statistics (ABS) revealed that the economy is slowing. Although Gross Domestic Product (GDP) rose 0.20% in the December quarter it slowed across each quarter in 2023 and strong population growth saw GDP per person fall over the year. The monthly Consumer Price Index (CPI) was steady in the 12 months to January 2024 at 3.40%, showing inflation is heading in the right direction. The annual change in retail trade has slowed to 1.1% in January 2024 from 7.7% in January 2023.

ABS data also revealed the labour market has been weakening, with the unemployment rate rising above 4% for the first time in two years in January 2024, a consequence of higher interest rates, persistent inflation and global economic uncertainty. If the labour market continues to weaken, this could provide further support for a cash rate cut to stimulate economic growth. 

Mortgage Choice home loan submission data indicates borrowers may be anticipating rate cuts. The February data shows that just 2.00% of loans submitted had a fixed component, with most customers opting for variable rate home loans. Available data for March suggests this trend in borrower preference is set to continue. 

The PropTrack Home Price Index shows that expectations of interest rate cuts are providing tailwinds for the housing market. The latest index revealed that national home prices lifted 0.45% to hit a new record in February. This marks the largest monthly rise since October 2023. Prices across the combined capital cities rose 0.48% to a fresh peak in February. Capital city prices are now 7.06% above the same time last year. 

PropTrack Senior economist Eleanor Creagh said, “The decision by the Reserve Bank to hold the cash rate steady in March will maintain both buyer and seller confidence. Looking ahead, the next move for interest rates is likely to be down. Despite a weaker outlook for the economy, the positive tailwinds for housing demand and a slowdown in the completion of new homes are likely to offset the impact of reduced affordability. As a result, prices are expected to lift further in the months ahead, particularly while the expectation remains that interest rates will move lower in late 2024.” 

Mr Waldron said, “The Reserve Bank will continue to be guided by the available economic data. While the signs point to a rate cut later this year, there’s no way to predict exactly when a cut might occur. I’d encourage borrowers to take control of their home loans now, rather than wait and see. If you haven’t had your home loan reviewed in the last 12 months, it’s a great time to speak to your broker to ensure your loan is still meeting your needs.  

“If you’re planning to buy a property in the coming months, make an appointment to speak to your broker to understand your borrowing power and explore your loan options.”