Rising house prices, rents and a twitchy inflation rate had some pundits predicting the Reserve Bank would lift rates again in October, but new governor Michele Bullock announced this week they would stay at 4.1 per cent.
It was the first meeting since Ms Bullock took the reins from former governor Philip Lowe, and despite keeping rates still for the fourth consecutive month, giving nervous homeowners some respite, she was quick to say more rate rises could be in the works.
Inflation was up a touch for the month of August, jumping to 5.2 per cent from 4.9 per cent the month prior.
It was the first jump in the inflation rate since April and it prompted the RBA to say future rate rises may be needed again to bring it back down.
“The higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so,” Ms Bullock said.
“In light of this and the uncertainty surrounding the economic outlook, the Board again decided to hold interest rates steady this month. This will provide further time to assess the impact of the increase in interest rates to date and the economic outlook.
“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable time frame, but that will continue to depend upon the data and the evolving assessment of risks.”
PopTrack senior economist Eleanor Creagh said that despite the bump in inflation figures, the economy was slowing and the higher mortgage burden from recent spikes in interest rates would continue to take the wind out of inflation.
“The significant increase in mortgage servicing costs, together with cost-of-living pressures, has seen consumer spending slow and weigh on economic activity. Conditions are expected to further soften in the coming months,” she told the ABC.
Ms Creagh said another month of steady interest rates would instill confidence in home buyers as the spring selling season approaches.
“Looking ahead, interest rates have very likely peaked and population growth is rebounding strongly,” she said.
“Together with a shortage of new home builds, prices are expected to rise and more markets will likely reach new record levels after recouping last year’s fast falls.”