The Reserve Bank has continued its pause on interest rates, in its fifth decision of the year.
Tuesday’s decision means the cash rate will remain at 4.35 per cent, as it has been since the most recent hike last November.
Economists largely anticipated the decision, with four in five economists and experts surveyed by Finder anticipating the cash rate would remain unchanged in August.
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In its decision, the RBA board said returning inflation to target within a reasonable timeframe remains its highest priority.
“Inflation in underlying terms remains too high, and the latest projections show that it will be some time, yet before inflation is sustainably in the target range,” it said.
“Data have reinforced the need to remain vigilant to upside risks to inflation and the Board is not ruling anything in or out.
“Policy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range.”
Treasurer Jim Chalmers said the “welcome decision” comes at a time of “global economic uncertainty”.
“Australians are doing it tough already, the last thing they needed was more cost of living pressure,” he said, following the board’s decision.
“It’s a decision which recognises the progress we’ve made on inflation, the softness in our economy, and very substantial global pressures.”
Chalmers said holding rates since November had provided “some extra certainty to mortgage holders and small businesses who are already under pressure”.
“Today’s decision is not a surprise. We know our economy is soft, and that previous rate rises are already slowing our economy, and the progress we’ve made on getting inflation down is making a difference,” he said.
“We’re doing our bit to ease the pressure on Australians through our responsible budget strategy, tax cuts for every taxpayer and energy rebates for every household and a million small businesses.”
The decision came after the Australian Bureau of Statistics (ABS) released the latest Consumer Price Index (CPI) numbers last week.
The CPI rose by 1 per cent in the second quarter of 2024, bringing annual headline inflation to 3.8 per cent, above the March quarter figure of 3.6 per cent.
Meanwhile, the Australian Council of Social Service had called on the RBA not to overreact to the inflation bump and to start cutting interest rates, to stop job losses and to ease the burden on households.
Higher interest rates, previously jacked up by the RBA to tame inflation, are weighing heavily on mortgage-holders, small businesses, first-home buyers and the economy as a whole.
A couple earning a combined $184,060, who maxed out their borrowing capacity to buy a home before rates starting going up, could now be putting nearly 44 per cent of their before-tax income towards repayments.
Inflation has also remained stubbornly high, and above the RBA’s two per cent to three per cent target range and has been accelerating, rising from 3.6 per cent annually in the March quarter to 3.8 per cent in June.
– With AAP
