"Even small differences in your interest rate can have a drastic impact on repayments, so when changes occur it is important to stay updated." - Kate Moore, Finance Support Manager
Despite a rise in inflation, the Reserve Bank of Australia has again opted to keep the official cash rate on hold at 0.1 per cent, issuing an optimistic forecast for the economy over the coming months.
In his monthly statement today, RBA Governor Dr Philip Lowe noted although the headline CPI inflation rate had risen to 3 per cent on the back of increased petrol prices, disruptions in the global supply chain and higher prices for newly constructed homes, underlying inflation remained low at 2.1 per cent.
“The central forecast is for underlying inflation of around 2.25 per cent over 2021 and 2022 and 2.5 per cent over 2023,” Dr Lowe stated.
“The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range.”
Dr Lowe said this would require the labour market to be tight enough to generate wages growth that is materially higher than it is currently.
“This is likely to take some time.
“The Board is prepared to be patient, with the central forecast being for underlying inflation to be no higher than 2.5 per cent at the end of 2023 and for only a gradual increase in wages growth.”
In general, Dr Lowe had a positive outlook for the economy, explaining there was likely to be GDP growth of 3 per cent over 2021 and 5.5 per cent and 2.5 per cent over the following two years.
However, there are uncertainties in terms of current disruptions to global supply chains and the behaviour of wages at the lowest unemployment rate in decades.
That unemployment rate is also predicted to trend lower over the next couple of years, reaching 4.25 per cent at the end of 2022 and 4 per cent at the end of 2023.
In terms of real estate, Dr Lowe noted house prices continued to rise in most markets and housing credit growth had picked up due to stronger demand for credit by both owner-occupiers and investors.
“The Bank welcomes APRA’s recent decision to increase the interest rate serviceability buffer on home loans,” Dr Lowe said.
“It is important that lending standards are maintained at a time of historically low interest rates.”
Andrew Acton, Explore Property
Explore Property Leader Andrew Acton said the RBA’s decision to maintain the official cash rate came as little surprise and would likely lead to continued confidence in the property market.
“People feel confident to borrow and invest without question,” he said.
Looking to the future, Mr Acton said he believed the capital cities would continue to boast a strong property market over the months ahead, but it would be regional and northern Australia that would enjoy a long path of prosperity.
Source: Elite Agent
Charlesworth, C. (2021, November 2). RBA keeps cash rate on hold but rises likely in 2023. Elite Agent. https://eliteagent.com/rba-keeps-cash-rate-on-hold-but-rise-likely-in-2023/
