In August 2024, the RBA has kept the cash rate steady at 4.35% for the sixth consecutive time, aligning with market expectations despite a slight increase in inflation to 3.8% for the June quarter.

What this means for the economy

• Global Outlook: The global economic picture is mixed, with varying growth rates across different regions. For example, Australia’s key trading partners are expected to see moderate growth, but China’s growth forecast has been lowered to 4.8% for 2024 due to weaker domestic consumption.
• Domestic Inflation: While inflation is dropping in the U.S. and parts of Europe, inflation remains high in Australia due to strong demand and a tight labour market which keeps upward pressure on prices.
  
  

Impact on the Labour and Housing Markets

For homeowners and potential buyers, the steady cash rate means mortgage rates should remain stable for now. However, high borrowing costs continue to weigh on the housing market. The RBA’s cautious approach suggests that while significant rate hikes are unlikely, any potential rate cuts are not expected until at least 2025.

What this means for You

• Mortgage Rates: The steady cash rate provides short-term stability in mortgage rates, but high borrowing costs and affordability issues continue to pressure the housing market.
• Rental and Construction Pressures: Rising rental prices and a slow-down in construction due to high costs and labour shortages could make housing even less affordable in the future.
• Future Outlook: Potential rate cuts are predicted for sometime in 2025, if inflation eases, although this remains uncertain. The RBA will closely monitor consumer spending, wage growth, and the housing market to guide future policy decisions.

If you would like to discuss how these developments might affect your financial plans, or if you’re thinking about refinancing, buying property, or exploring your options, we invite you to get in touch using the link below. We are here to help you help guide you through these changes and make informed decisions.

Steven Papanastasiou – Principal, SCM Finance Solutions