Interest rate unchanged for third month in a row

It’s the third consecutive month with out motion within the nationwide rate of interest, with earlier hikes “working to ascertain a extra sustainable stability” based on Lowe.

It comes after Australians had been whacked with 4 share factors of fee hikes since Might final yr, resulting in dearer mortgage repayments and tighter purse strings.

The most recent pause has spared the everyday home-owner one other $78 improve in month-to-month repayments on a $500,000, 25-year house mortgage.

The final fee rise was in July – on the time the 12^th since Might 2022 – because the Reserve Financial institution tried to rein in inflation amid disappointing wage progress.

Lowe right this moment stated a stability wanted to be struck between provide and demand within the financial system.

“In gentle of this and the uncertainty surrounding the financial outlook, the Board once more determined to carry rates of interest regular this month,” Lowe stated in his final financial coverage resolution assertion as governor.

“This can present additional time to evaluate the influence of the rise in rates of interest up to now and the financial outlook.”

He stated inflation in Australia had handed its peak, however that it was nonetheless too excessive.

“Whereas items value inflation has eased, the costs of many companies are rising briskly. Lease inflation can be elevated,” he stated.

“The central forecast is for CPI inflation to proceed to say no and to be again inside the 2–3 per cent goal vary in late 2025.”

Lowe stated that prime inflation was weighing on folks’s actual incomes and consumption progress was weak.

“Returning inflation to focus on inside an inexpensive timeframe stays the Board’s precedence. Excessive inflation makes life troublesome for everybody and damages the functioning of the financial system. It erodes the worth of financial savings, hurts family budgets, makes it more durable for companies to plan and make investments, and worsens revenue inequality,” he stated.

“And if excessive inflation had been to develop into entrenched in folks’s expectations, it might be very pricey to cut back later, involving even increased rates of interest and a bigger rise in unemployment.

“Up to now, medium-term inflation expectations have been per the inflation goal and it’s important that this stays the case.”

The outgoing governor additionally stated there have been “vital uncertainties” across the RBA’s outlook.

“Providers value inflation has been surprisingly persistent abroad and the identical may happen in Australia. There are additionally uncertainties concerning the lags within the impact of financial coverage and the way companies’ pricing choices and wages reply to the slower progress within the financial system at a time when the labour market stays tight,” Lowe stated.

“The outlook for family consumption additionally stays unsure, with many households experiencing a painful squeeze on their funds, whereas some are benefiting from rising housing costs, substantial financial savings buffers and better curiosity revenue.

“And globally, there may be elevated uncertainty across the outlook for the Chinese language financial system because of ongoing stresses within the property market.”

Future fee hikes weren’t dominated out, which “could also be required to make sure that inflation returns to focus on in an inexpensive timeframe”.

The choice to carry the rate of interest follows information revealed by Roy Morgan final week exhibiting that 1.5 million mortgage holders had been “in danger” over the three months to July – a file excessive, with 640,000 extra households in stress than they had been this time final yr.

It additionally comes as inflation is falling quicker than anticipated, with month-to-month figures revealed final week by the Australian Bureau of Statistics demonstrating a bigger-than-forecast decline.

The RBA introduced Lowe’s successor in July, with Michele Bullock to take the governor function from 18 September.

Supported by the Authorities of South Australia