RBA Rates Announcement July 2023

04.07.23 | Michael Brown | News

Today, the RBA announced good news for Sydney’s home mortgage holders with the official cash rate remaining on hold at 4.10%.

Today marks only the second occasion in the last 14 months that the rate has remained steady rather than increased.

Last week’s figures may have influenced today’s news. Headline inflation fell to 5.6% over the 12 months to May, down from 6.8 per cent in April.

That is a significant fall, suggesting the inflation ceiling has been reached. And while underlying inflation eased only slightly, the RBA believes this month is a good time to hold off on a hike.

But for how long?

The RBA warned today, ‘high inflation makes life difficult for everyone and … if high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later, involving even higher interest rates and a larger rise in unemployment.

‘For these reasons, the Board’s priority is to return inflation to target within a reasonable timeframe.

‘Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve.’

What’s clear is that inflation remains higher than the RBA would like, with its target range being 2–3%.

And while employment is booming — which is good news for Sydney job seekers as they cope with a cost of living surge — the RBA deputy governor explained in a recent speech that this could also be a problem.

She noted that the jobless rate would need to rise to 4.5% for it to have any downward effect on inflation.

With the current unemployment rate at a pleasingly low rate of 3.6%, around 150,000 Australians would lose their jobs if the rate rose to 4.5%. It’s a good example of how interconnected the economic ecosystem can be.

Meanwhile, with the new financial year ticking over, it is the peak reset time for the “Mortgage Cliff”. Many of the estimated 880,000 loans in Australia move to a higher rate as of July 1, with repayments set to soar.

This may take more spending steam out of the economy, which we’re sure the RBA will be monitoring closely at its next monthly monetary policy meeting on 1 August.

‘The Board is still expecting the economy to grow as inflation returns to the 2–3 per cent target range, but the path to achieving this balance is a narrow one,’ the RBA added.

If rates have you concerned, reach out to Mortgage Broker Sydney. Our friendly brokers can meet you wherever is most convenient: your home, office or local cafe. We’re flexible.

In addition, we are here to provide guidance on various strategies such as uncovering lower rates, enhancing savings, consolidating debts, and alleviating the impact of rising household prices.