iscover
Leading up to the announcement, most were convinced the Reserve Bank would cut rates by 25 basis points, bring the cash rate to 3.60 per cent.
Each of the majors, as well as the many vocal economists, was convinced the central bank was positioned to cut rates.
At its meeting, the decision received two-thirds vote in favour of a hold, with one-third voting against.
ANZ said this disparity showed a “reasonable degree of divergence for a board that has traditionally tried to arrive at decisions by consensus”.
While the hold was not expected, it wasn’t wholly ruled out, with a tight labour market and continued uncertainty in the global economy playing key factors in the decision.
The Reserve Bank appears to be limiting cuts to once per quarter to account for the uncertainty.
Inflation is within the 2–3 per cent target range (currently at 2.4 per cent). The RBA said it is waiting for more information to confirm inflation hangs around 2.5 per cent on a “sustainable basis.”
This quarter’s inflation figures, released at the end of the month, will play a decisive role in the next monetary policy meeting.
Following the announcement, industry leaders have come forward and expressed mixed emotions about the decision.
Home Loan Experts’ CEO Otto Dargan said the central bank is “nervous” as geopolitics continue to influence the domestic economy.
He said the decision reinforces caution over action: “In classic RBA fashion, if they’re unsure, they hold.”
Money.com.au’s mortgage expert Debbie Hays said: “It’s not often the big four and markets miss the mark – but this time, they all misread the room. In fact, we all did.”
Even the government was surprised, with Treasurer Jim Chalmers recognising the market was not expecting a hold and that millions of Australians would be disappointed. However, he commended the effort made to squash inflation over 2025.
Others weren’t so positive, as one Broker Daily commenter said the RBA is “out of touch with the reality of daily life.”
Another said those who made the decision should “hang their heads in shame” and the government should ask why this hold was agreed upon.
The property market may have played an important role in holding rates as limited supply and strong buyer activity risk pricing out first home buyers.
However, the consequences of a hold could limit home building activity, compounding supply issues.
HIA said the RBA missed an opportunity to further boost construction figures as the last two rate cuts spurred home building activity.
Looking ahead, Cotality’s head of research Eliza Owen said an August cut is “almost certain” with inflation falling, weak retail sales, and “sluggish” GDP per capita supporting this.
ANZ agreed that an August cut was expected and that this rate cut cycle will end at 3.35 per cent.
Still opportunity for brokers
Despite the disappointing news, brokers still have an opportunity to secure better financing for borrowers.
MFAA CEO Anja Pannek said brokers should speak to clients about repricing, refinancing, or consolidating debt to help mitigate financial strain.
Brokers agreed and Home Loan Experts’ senior mortgage broker Romy Dhungana said there is a clear opportunity for borrowers to reduce costs.
“Refinancing remains a critical strategy for households looking to reduce costs. Without a rate cut to stimulate the market, we’re likely to see a more balanced property environment in the short term,” he said.
Manish Rana added that while there will be no changes to payments today, many lenders may have adjusted rates behind the scenes, which could provide relief.
[Related: RBA defies predictions, holds rates]
