Interest rates are on hold … for now. Photo: Michelle Kroll.
First, the good news — as was widely expected, the Reserve Bank of Australia (RBA) has unanimously decided to keep the cash rate at 4.35 per cent at today’s June Monetary Policy Board meeting.
But the bad news is, despite three consecutive rate rises this year, softer growth results, an increase in unemployment, and better-than-forecast inflation figures, there appears to be little sign of relief on the horizon for mortgage holders for at least the remainder of 2026.
The decision was based on inflation data to 30 April.
In its post-meeting statement, the RBA Board said while the headline and underlying rates of inflation were still too high, financial conditions had tightened and there were signs that growth in consumer spending was slowing and housing prices had fallen in some capital cities.
“There continue(s) to be heightened uncertainties about the outlook for domestic economic activity and inflation,” the board said.
“Resolution of the conflict in the Middle East is at an early stage, and there are plausible scenarios where inflation is higher and activity lower than envisaged under the May baseline forecasts.
“Global oil supply issues will take some time to resolve, maintaining upward pressure on global energy prices and inflation.
“At the same time, a period of prolonged uncertainty may also cause growth to be lower in Australia’s major trading partners and in Australia.”
It said higher fuel prices had added directly to inflation and these increases had been passed on to other goods and services, leading to predictions inflation is likely to remain high for some time.
“The Board remains focused on ensuring that inflation does not become embedded once the impulse from higher oil prices has passed through,” it said.
“Following the three increases in the cash rate target since the beginning of the year, financial conditions are now tighter than they were, and there are signs that the economy is slowing as expected.
“But inflation is still too high and the Board judged that it was appropriate to leave the cash rate target unchanged while it assesses the response to previous interest rate rises and the impact of the oil supply disruption.”
Most analysts predict the cash rate will stay constant or may even rise slightly for the rest of 2026 while conditions in the Middle East stabilise, allowing global supply chains of fuel and goods to return to some semblance of normality.
All four major banks had predicted the rate would be held before today’s meeting, although Westpac has predicted further rises this year.
Treasurer Jim Chalmers welcomed the RBA’s decision, but expressed caution due to global impacts.
“We welcome this decision from the independent Reserve Bank to keep rates steady,” he said.
“This is the first interest rates decision since the very responsible budget that we handed down not that long ago. And since then, we’ve seen some very welcome developments in the Middle East as well.
“For millions of Australians with a mortgage, it doesn’t make life any easier for people, but it doesn’t make life harder, either.
“In Australia, we’ve seen inflation come off a bit, but we still know that those inflationary pressures are there, made worse by the war in the Middle East and its aftermath.
“We’ve seen inflation come off a little bit in Australia in the most recent data, but we’ve seen it go up in Europe, in the US and Canada. And of course, we’ve just seen the Japanese central bank raise interest rates.”
Shadow Treasurer Tim Wilson was less than enthusiastic about the hold.
“The Reserve Bank has been forced to hold interest rates at their highest level under this Labor Government because of the Treasurer’s active inflation agenda,” he said.
“A pause at the peak is not the relief Australians were promised. Families are stuck paying the highest mortgage rates seen under Labor, with no end in sight, while the Treasurer keeps fuelling the very inflation that is keeping them there.
“The reason the Reserve Bank cannot cut rates is because inflation is still too high, it is homegrown, and it started long before a shot was fired in Iran.
“Until the Treasurer stops pouring debt petrol on the inflation fire, there is no path back to lower interest rates.”
The RBA’s next meeting is scheduled for August.
Original Article published by Andrew McLaughlin on PS News.
