Cash Rate
The Reserve Bank of Australia (RBA) left its cash rate unchanged at 4.35% for the sixth meeting in a row on Tuesday, 6th August 2024. The next RBA meeting and Official Cash Rate announcement is scheduled for 24th September 2024.
Key takeaways from their statement below:
- Cash rate unchanged at 4.35%
- The current underlying Consumer Price Index (CPI) inflation rate is 3.9% for the year leading up to the June quarter
- Although inflation has decreased since its peak in 2022, it is still above the target range of 2-3%
- Revisions in consumption, high unit labour costs, and sustained inflation in the services sector all pose upside risks to inflation
- Wage growth seems to have peaked, but is still higher than what trend productivity growth will allow for
- Economic activity momentum is weak, as seen by slow Gross Domestic Product (GDP) growth, rising unemployment rates, and pressure on businesses
Rate Expectations
Source: ASX RBA Rate Tracker
Inflation
- Current Underlying CPI Inflation is 3.9% over the year to the June quarter and has been above the midpoint target for 11 consecutive quarters.
- The current inflation rate indicates the economy may not be able to meet domestic demand as well as previously believed.
- Inflation is expected to return to the target range of 2-3% late in 2025 and approach the midpoint in 2026.
- The Board’s top priority is restoring inflation to target within a reasonable timeframe, which is consistent with the RBA’s goal of ensuring price stability and full employment.
Source: RBA
Property Market Update
- Home values went up by 0.5% in July, indicating 18 months of growth. (CoreLogic)
- Perth saw a year-on-year growth of 22.77%, while Adelaide and Brisbane grew by 14.81% and 13.93% respectively. (Broker News)
- A second property boom in Perth is anticipated once interest rates decrease in 2025. (Domain)
Rental Market Update
- Declines were observed in rental prices in Brisbane, Hobart, and Sydney
- CoreLogic’s rental index rose only 0.1% in July, the smallest monthly increase since August 2020
Lending Data
- Australian Bureau of Statistics (ABS) lending data shows the total value of new housing loans rose 1.3% in June to $29.2 billion.
- ABS head of finance statistics, Mish Tan, noted investor lending growth outpaced owner-occupier growth in June.
- Investor loans climbed 2.7% to $11 billion, a 30.2% increase compared to last year.
- New owner-occupier loans increased by 0.5% to $18.2 billion, reflecting an annual gain of 13.2%.
- First home buyer loans rose 0.7% in June and increased by 3.4% compared to last year, driven by a 6.5% growth in Victoria.
- New investor loan growth was observed across all states, led by New South Wales (up 27.3%), Queensland (up 34.5%) and Western Australia (up 56.7%).
- Personal fixed term loans rose 1.1% to $2.6 billion, an 11.7% increase from last year.
Economic Outlook
- Meeting the target inflation rate may take longer if the labour market remains tight or GDP growth is stronger than expected.
- Stronger-than-expected public demand and an increase in household expenditure as real incomes rise have improved the GDP picture.
- It is anticipated that faster growth in imports and slower growth in home development will partially counteract these concerns.
- Slow recovery has been observed in advanced economies, but Australian economic growth is expected to improve next year.
