The Reserve Bank of Australia (RBA) has held the official cash rate at 4.35% following its latest board meeting, marking the eighth consecutive time rates have remained unchanged.
This decision, widely anticipated by economists and investors, comes amid continued concerns about underlying inflation.
The RBA board’s statement highlighted that, while headline inflation has dropped to 2.8% in the year to September, core inflation—at 3.5%—remains above the 2.5% midpoint target. The board indicated that inflation is unlikely to return sustainably to the target range until 2026.
Economists had forecast the RBA’s decision accurately, with all 38 experts in a recent Finder survey predicting no change at the November meeting.
Independent economist Saul Eslake noted that, despite other advanced economies easing their monetary policies, the RBA is expected to hold rates until at least February 2025.
“The September quarter ‘underlying’ inflation numbers were in line with the RBA’s expectations and not ‘good’ enough to give it the confidence it needs that underlying inflation is heading ‘sustainably’ back to its target band to justify cutting rates in either November or December,” he said.
“Just because other central banks are cutting rates doesn’t mean the RBA has to,” pointing out that Australia did not raise rates as aggressively as the US, Canada, UK, or New Zealand.
Geoffrey Kingston, Macquarie University Business School was also in agreeance.
“Higher for longer remains the watchword for the cash rate. September did see falls in both the headline and core inflation rates.
“However, the core rate is still outside the target band, the labour market is still fairly strong and public spending remains elevated. With a federal election likely in the first half of next year, it’s hard to see a spending cut any time soon.”
Australia’s economic backdrop remains steady, with unemployment at 4.1%—a relatively moderate increase from the low of 3.5% in late 2022.
The RBA, led by Governor Michele Bullock, will continue to monitor these and other economic indicators, including the response to tax cuts, before making any policy shifts.
She said the RBA remains committed to its goal of returning inflation to target levels, stating that monetary policy will stay restrictive as needed to achieve price stability and full employment.
The board also noted persistent uncertainties both domestically and globally, including the pace of consumer spending, labour market conditions, and geopolitical factors influencing global markets.
Mortgage holders, therefore, are unlikely to see any immediate rate relief, as the central bank waits for clearer signs of reduced inflation and economic adjustment before considering rate cuts in 2025.
Eleanor Creagh, REA Group Senior Economist
The third-quarter consumer price index (CPI) confirmed inflation is easing, but not enough to shift the RBA’s policy stance. Although headline inflation is within the 2%-3% target, underlying price pressures and a resilient labour market make an interest rate cut this year unlikely.
Despite the economy continuing to track through a period of weak growth, the RBA is likely to remain on hold unless an external shock, higher unemployment or lower underlying inflation occurs, as it aims to sustainably return inflation to target.
Households remain under pressure with consumer sentiment subdued. Although employment growth has been strong and unemployment steady at 4.1% in September, the labour market has softened over the past year.
Slowing employment and inflation may prompt rate cuts from February 2025, but the resilient labour market and stickier components of inflation could delay this timeline.
Home price growth has persisted despite the higher interest rate environment, with the PropTrack Home Price Index indicating national home prices hit a fresh record in October. Prices have now cycled through 22 consecutive months of growth, although performance differs significantly around the country.
The pace of home-price growth remains slower than earlier in the year as buyers enjoy more choice and high interest rates and affordability constraints remain. While a higher number of properties listed for sale and uncertainty around rate cuts may slow price growth, prices are expected to keep rising as the selling season closes out.
Mathew Tiller | Head of Research | LJ Hooker Group
Today, the RBA kept the official cash rate at 4.35%, a decision widely anticipated given strong employment figures and persistent underlying inflation. For the property market, this decision is expected to sustain elevated listing numbers, extend the spring selling season through to Christmas, and maintain steady buyer demand.
The ABS September quarter CPI data provided some positive news: headline inflation has dropped to 2.8%, now within the RBA’s target range. However, this figure is influenced by temporary government rebates on electricity and a decline in fuel prices. Underlying inflation—the RBA’s preferred measure—remains elevated at 3.5%. Combined with strong employment data, it is likely the RBA will hold off on any rate cuts for the foreseeable future. The takeaway? No Christmas rate cut this year.
Recent data shows that while property prices continue to rise, growth is slowing and performance varies by region. Spring has brought a considerable increase in new listings, providing buyers with more choices, while demand remains steady, particularly in the more affordable segments of mid-sized capital cities.
CoreLogic reports that national housing values rose by 0.3% in October 2024, led by Perth at 1.4%, followed by Adelaide at 1.1% and Brisbane at 0.7%. Sydney and Melbourne saw slight declines of -0.1% and -0.2%. Affordability remains a significant driver, with most activity focused within the lower price quartile, fuelled by first-time buyers and investors.
New listings have risen by 12.7% since winter, pushing Sydney’s total listings 13.2% above the five-year average, while Perth, Adelaide, and Brisbane continue to face listing shortages, reflecting tighter market conditions. The LJ Hooker network has reported a 5-7% month-on-month increase in appraisals, suggesting a strong pipeline of new property listings heading into the new year.
The property market is expected to maintain its current trajectory, with limited new supply in certain areas continuing to support price growth. However, affordability challenges and higher mortgage rates will gradually slow momentum, particularly in larger capitals, until rate cuts commence in 2025. Buyer interest is projected to stay steady through the end of the year, supported by population growth, strong employment, wage increases, and a tight rental market.
Nerida Conisbee, Ray White Group Chief Economist
We are getting close but unfortunately November was not the month for a rate cut. Although inflation is now within the target range, hitting 2.8 per cent last week, the RBA decided to keep rates on hold.
Why the hesitation? There are a few reasons. The main one being that the economy appears to be doing ok, even with higher rates. Importantly, there is significant job growth – if people want a job, they are still able to find one.
The second is that the declining inflation rate was at least partially manufactured by Federal Government programs – the National Energy Bill Relief resulted in a decline in energy spending by households.
Rental price growth remains high but was moderated by Commonwealth Rent Assistance changes. The third is that while households may be feeling the pinch, they are still spending a lot on holidays – a key component of inflation was a rise in recreational spending.
But there are some more sobering signs in the economy. The first is that we continue to see the participation rate increasing and this is at least partly driven by rising household stress.
Youth unemployment is now close to 10 per cent and rising – younger people are bearing the brunt of the economy slowing. And while the economy is growing, the rate of growth is lacklustre – the annual increase in June was just one per cent, the slowest growth rate since the early 1990s recession, excluding the COVID-19 pandemic period.
While it was a hold this month, the RBA should look to cut in December. Interest rate cuts take time to have an impact on the economy. The exact timing of this lag is uncertain however some research has shown it can be as much as 18 months. Our economy is holding on for now, but this is unlikely to last.
BresicWhitney CEO, Thomas McGlynn
The holding of the cash rate symbolises what has been quite a challenging and at times a volatile year for Sydney property. There would have been many hoping for a reduction today but we feel this decision now paves the way more certainty in 2025.
I think once the reductions start to appear, hopefully within the first couple of months of next year, a lot of buyers and sellers will feel that they’re able to make decisions with more clarity, and with less concern that they may find themselves in an unsustainable financial position.
One of the challenges in the Sydney market, in part due to the high interest rate environment, has been the gap that’s existed between what buyers felt properties were worth or what they were prepared to pay, and what sellers expected. With that gap now narrowing, this will further support healthy and balanced conditions in 2025.
One of the biggest takeaways we’ve seen throughout these conditions is the impact that a high-performing sales team can have in delivering outcomes in favour of sellers, even when the market is turning. Part of that is ensuring you’re constantly educating both parties on what the realities are.
One of those truths is that generally people who buy and sell within the same market will do quite well, and it’s about ensuring you’re not stuck in analysis paralysis of trying to time the market perfectly. That’s something that will remain and should be remembered even when conditions shift, somewhat regardless of whether they’re going up or down.
