RBA holds interest rates: What it means for mortgage holders

By Stephen Johnson, Economics Reporter For Daily Mail Australia

Published: 03:30 GMT, 19 March 2024 | Updated: 03:47 GMT, 19 March 2024

The Reserve Bank has issued a chilling warning for every Australian home borrower.

The cash rate was left on hold at a 12-year high of 4.35 per cent on Tuesday afternoon but Governor Michele Bullock warned more rate rises were possible – dealing a blow to those hoping for a rate cut soon.

‘The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the board is not ruling anything in or out,’ she said.

‘Returning inflation to target within a reasonable timeframe remains the board’s highest priority.’

The Reserve Bank has issued a chilling warning for every Australian home borrower (pictured is a Sydney auction)

The major banks and economists had been expecting rate cuts in 2024 as inflation moderates. 

But Ms Bullock said inflation was still too high, even though interest rates were kept on hold for the third straight RBA meeting.

‘While recent data indicate that inflation is easing, it remains high,’ she said.

‘The board expects that it will be some time yet before inflation is sustainably in the target range.’

Monthly inflation data showed the consumer price index at 3.4 per cent in January, which is only marginally above the RBA’s 2 to 3 per cent target. 

But the more comprehensive quarterly CPI data had headline inflation at 4.1 per cent in December.

The Reserve Bank is not expecting inflation to fall to within its 2 to 3 per cent target band until December 2025, it revealed in February.

Ms Bullock warned inflation could stay high unless productivity improved to justify faster wages growth.

Australia’s hourly productivity levels last year shrunk by 0.4 per cent – a far cry from the long-run average of 3 per cent.

‘Nevertheless, this level of wages growth remains consistent with the inflation target only on the assumption that productivity growth increases to around its long-run average,’ she said.

The RBA’s 13 rate rises in 18 months, between May 2022 and November 2023, marked the most aggressive pace of monetary policy tightening since 1989.

They have slowed the economy with gross domestic product expanding by just 0.2 per cent in the December quarter.

Australia’s annual growth pace of 1.5 per cent in 2023 was almost half the 2.7 per cent level of 2022.

‘While there are encouraging signs that inflation is moderating, the economic outlook remains uncertain,’ Ms Bullock said.

The cash rate was left on hold at a 12-year high of 4.35 per cent on Tuesday but Governor Michele Bullock warned more rate rises were possible – dealing a blow to those hoping for a rate cut soon

‘The December quarter national accounts data confirmed growth has slowed.’

Australia hasn’t experienced a recession since the 2020 Covid lockdowns but it has been in a per capita recession since the March quarter of last year, where output per worker has been shrinking. 

The RBA is now meeting eight times a year rather than on the first Tuesday of every month except January.

Ms Bullock is holding a media conference at 3.30pm, Sydney time, following a two-day board meeting on monetary policy.

The next Reserve Bank board meeting will be on May 6 and 7. 

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RBA holds interest rates: What it means for mortgage holders

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