The Reserve Bank of Australia (RBA) has opted to maintain the cash rate target at 4.35 per cent, keeping the door open for additional rate hikes should inflation persist at elevated levels. This decision comes on the heels of stronger-than-expected inflation data in the March quarter, dampening hopes for an early rate cut among market participants.
Speaking on behalf of the board , RBA governor Michele Bullock said: “We don’t think we necessarily have to tighten again”.
She went on to say:
“Conditions are restrictive. We know that interest rates impact different sectors of the economy and different households, in different ways, and what we are really trying to do is slow things enough to bring inflation down without tipping the economy into recession.
“I hope that we don’t have to raise interest rates again, but having said that, if we think we have to, we will.”
PropTrack senior economist Eleanor Creagh noted that since the last adjustment in November, the property market had experienced robust activity, propelled by consistent confidence among buyers and sellers. The summer selling season witnessed rapid price escalation, signaling stability in interest rates. Nonetheless, with expectations for rate cuts pushed to early 2025, experts anticipate a deceleration in property price growth as the market transitions into the quieter winter phase.
Additionally, in response to last Tuesday’s decision, Knight Frank chief economist Ben Burston remarked that the RBA’s announcement considerably reduced the probability of a rate cut occurring this year.
“It still could happen, but it’s much less likely now. They’re not ruling anything out,” he said.
Another PropTracks economist, Anne Flaherty, said the current market had defied post-Easter trends.
Auction activity has remained strong, despite disruptions during April throughout the country, including school holidays and long weekends. The number of homes scheduled for auction has surged compared to the same period last year, with clearance rates holding steady, indicating ongoing demand from buyers.
The 2024 Federal Budget priorities for the Federal Government’s re-election campaign are expected to heavily feature housing, which is encouraging news.
The housing shortage, marked by record-high home prices, the worst affordability in over two decades, and a rental market crisis, remains a significant issue.
The Government’s target is to construct 1.2 million new homes by 2029, but progress toward this goal is lagging.
However, there’s positive news as $90.6 million has been earmarked to tackle labor shortages in the construction and housing sectors. This allocation is a significant step forward in getting the initiatives back on track to hopefully meet the established targets.
