The RBA held the cash rate today, but as consumer finance expert Joel Gibson explains, household budgets are still under real pressure.\u00a0<\/p>\n
The Reserve Bank of Australia held the cash rate at 4.35 per cent at its August meeting, choosing not to add a fourth increase to the three delivered earlier this year. For business owners hoping for some breathing room, the decision offers a pause rather than relief.<\/p>\n
Annual headline inflation eased to 3.8 per cent in the year to June, down from 4.0 per cent in May, according to the Australian Bureau of Statistics. The RBA\u2019s preferred measure of underlying inflation, the trimmed mean, held steady at 3.6 per cent. Housing costs remained the biggest driver of the increase, up 6.8 per cent over the year.<\/p>\n
Joel Gibson, consumer finance expert at Zyft, says the hold shouldn\u2019t be mistaken for good news.<\/p>\n
\u201cHomeowners might be breathing a sigh of relief that rates haven\u2019t gone up again today, but there\u2019s not much to celebrate. Rates remain at their equal-highest level since 2011, and after three rises already this year, households are still feeling the squeeze.\u201d<\/p>\n
According to Gibson, the cumulative effect of this year\u2019s earlier rate rises is still working through household budgets, with the major banks not tipping meaningful relief until 2027. He points to grocery costs as a further pressure point, citing Zyft\u2019s own price tracking of supermarket staples at Coles and Woolworths since January, which the company says shows sharp increases across everyday items including beef mince, butter and fresh milk.<\/p>\n
\u201cThe squeeze goes well beyond mortgages. Headline inflation is sitting at 3.8%, with some of the biggest increases coming from the things households simply can\u2019t avoid.\u201d<\/p>\n
Gibson argues that when multiple costs rise at once, mortgage repayments, groceries, energy and insurance among them, household budgets have little room left to move, and that\u2019s changing how Australians spend.<\/p>\n
\u201cAustralians are becoming much more deliberate about where their money goes. When household budgets are under this much pressure, consumers are less willing to take a price or promotion at face value, they\u2019re comparing more, questioning whether something is genuinely a good deal and looking for value before they spend.\u201d<\/p>\n
Rate hold attributed to Oliver Hume Property Group chief economist, Matt Bell<\/p>\n
For the second meeting in a row, financial markets agreed completely with surveyed economists and gave virtually no chance of a rate hike today. And consistent with every decision this year, the RBA delivered in line with market expectations. Before today\u2019s decision markets had priced in ~96% chance of no change.<\/p>\n
June inflation coming in below market expectations and in line with RBA forecasts was enough to offset ongoing strong household spending and a persistently low unemployment rate and keep the RBA on a watch-and-see pattern after the 0.75% of rate hikes in February, March and April.<\/p>\n
Markets have just below a 50% chance of another 0.25% hike by December, with that rising to just over 50% by March 2027, with cuts commencing in the second half of 2027 at the earliest.<\/p>\n
So, since the last decision in early June, we\u2019re back to the same point: a real possibility we are at the peak of the rate cycle, having reversed all of 2025\u2019s cuts. What is the outlook for property?<\/p>\n
Now that a lot of the hysteria around the budget taxation changes for investors has died down, rates remain the main driver of the short term outlook. The fundamentals haven\u2019t changed. Demand exceeds supply in most markets and household budgets remain in good shape.<\/p>\n