Australian homeowners hoping for some financial relief on Melbourne Cup Day were left disappointed as the Reserve Bank of Australia held firm on interest rates, keeping the official cash rate at 4.35%.
The RBA's November meeting, traditionally held on the first Tuesday of the month coinciding with the race that stops a nation, delivered what many borrowers had feared - no reprieve from the aggressive tightening cycle that has pushed mortgage payments to their highest level in over a decade.
Inflation Battle Continues
RBA Governor Philip Lowe indicated that while inflation is gradually moderating, it remains too high for comfort. "The Board judged that holding interest rates steady at this meeting would provide more time to assess the impact of previous rate increases," Dr Lowe stated in his post-meeting announcement.
Recent inflation data has shown some encouraging signs, with the monthly Consumer Price Index indicator rising 5.6% in the year to September, down from 6% in August. However, this remains well above the RBA's target band of 2-3%.
Mortgage Stress Mounts
For the average Australian homeowner with a $500,000 mortgage, today's decision means monthly repayments will remain approximately $1,210 higher than they were before the rate hiking cycle began in May 2022.
Financial experts warn that many households are now reaching their breaking point. "We're seeing mortgage stress spread from low-income households into middle Australia," said AMP chief economist Shane Oliver. "Another rate hold provides stability, but no relief for those already struggling."
What's Next for Borrowers?
Economists are divided on whether this marks the peak of the tightening cycle. Some key factors the RBA will be watching include:
- Upcoming quarterly inflation data due later this month
- Retail spending figures in the lead-up to Christmas
- Global economic conditions, particularly in China
- Domestic employment data and wage growth
Most market analysts now predict the RBA will maintain its current wait-and-see approach through the summer months, with the next potential rate movement unlikely until early 2024.
For now, Australian homeowners continue to bear the brunt of the inflation fight, with Melbourne Cup Day 2023 marking another chapter in the ongoing cost of living crisis.
