RBA holds cash rate at June meeting

The Reserve Bank Board has left interest rates on hold at a 12-year high of 4.35% for the fifth time in a row at its June meeting this afternoon.

In a statement released after the meeting, the Board reiterated that all options are still on the table in its fight against inflation. The context being that the consumer price index has been hovering around the 3.5% mark for months - just above the upper end of the central bank's inflation target range of 2-3%.

"Inflation is easing but has been doing so more slowly than previously expected and it remains high. The Board expects that it will be some time yet before inflation is sustainably in the target range.

"While recent data have been mixed, they have reinforced the need to remain vigilant to upside risks to inflation. 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."

The outcome of today's rate decision won't have come as a surprise to most onlookers though.

All 43 economists polled by Reuters in the lead-up to the meeting agreed that the Reserve Bank would keep rates steady, while all 38 experts surveyed in a separate survey by Finder thought the same.

Shane Oliver, chief economist at AMP and one of the Finder survey participants, is anticipating more of the same from the RBA for a few months at least.

"Following recent higher than expected inflation data the RBA still lacks the confidence to start cutting rates and so will hold for the next few meetings, with the risks still being on the upside for rates. But weaker growth and lower inflation should allow a cut by year end."

Is a 2024 rate cut still on the cards?

While the Reserve Bank Board maintains that it's keeping its options open, the thinking outside of the central bank skews heavily towards the idea that the next cash rate move will be down. The question, though, is when?

Among the economists and experts surveyed by Finder, the current consensus is that the Reserve Bank will start cutting the cash rate at the end of this year or the start of 2025.

More than 20% of survey respondents have the RBA Board's November meeting pencilled in as the most likely date for an initial cut, while 18% are forecasting a cut in December and 24% next February.

Elsewhere, one of Australia's largest banks recently pushed back its own forecast. In a client note sent out last week, ANZ's head of Australian economics, Adam Boyton, said that the bank had updated its outlook for a first rate cut from November to February.

The Commonwealth Bank, NAB and Westpac, on the other hand, are all still forecasting a cash rate cut before the end of the year.

Higher repayments continue to take their toll

Of course, most homeowners with a mortgage will be hoping that the Reserve Bank makes a move to cut rates sooner rather than later.

Over the past two years many have seen their loan repayments rise by hundreds, if not thousands of dollars each month - increases which have only added to the pressure on some household budgets.

In fact, the latest Roy Morgan research found that nearly a third of all borrowers (the equivalent of 1.56 million people) were at risk of mortgage stress in the three months to April.

That's not quite as high as the recent peak at the start of the year, but it's one of the highest levels of recorded since 2008.

As mortgage-related financial stress has risen, so too has the number of customers reaching out to their lenders for hardship support. At least, that's according to a report published last month by the Australian Securities and Investments Commission (ASIC).

Towards the beginning of the recent hiking cycle ASIC found that customers of ten major lenders lodged a combined 30,562 hardship notices during the September quarter of 2022. In just over a year that number had risen to 52,826 during the December quarter of 2023.

Though homeowners with a mortgage may have to wait a while longer before they receive any relief on the rate front, they'll get an updated look into the Reserve Bank's thinking when the Board convenes for its next monetary policy meeting in seven weeks' time on August 5 and 6.

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