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The Christmas present we all needed. RBA holds rates…for now

Oktay Sengoz

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06/12/2023

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1.5 min read

The Reserve Bank of Australia announced on Tuesday that interest rates will remain unchanged for the remainder of the year. This news was welcomed by mortgage holders, especially coming into the festive season where consumer spending seasonally increases.

Will this be the last rate increase we see from the RBA?

Here are the factors that could trigger more rate increases and more pain for mortgage holders.

Inflation dynamics

The Reserve Bank closely monitors inflation trends, and any sustained increase may prompt a reevaluation of interest rates. A delicate balance must be struck to ensure that inflation remains within the target range without stifling economic growth. Of course with the upcoming festive season, consumer spending will naturally increase and drive up inflation. Let’s hope this doesn’t give the RBA a reason to increase rates early in 2024.

Employment trends

The state of the job market is a critical indicator of economic health. The Reserve Bank will likely keep a close eye on employment figures and wage growth, as these factors influence consumer spending and overall economic activity. The current unemployment rate is 3.7%, and the RBA would like to see this number increase. Although employment is tight, the RBA agree that conditions are easing.

Housing market stability

Australia's housing market has been a focal point in recent discussions. A balance must be struck between supporting the housing sector and avoiding the creation of asset bubbles that could pose risks to financial stability. Currently the housing market is seeing an increase in demand due to higher than expected net overseas immigration into Australia, the Australian Financial Review reported that we have already hit 500,000 immigrants to September 23.

As we move into 2024, the Australian economy stands at a crossroads, and the Reserve Bank's decisions will play a pivotal role in shaping its trajectory. While the current decision to keep rates on hold provides a sense of stability, the evolving economic landscape suggests that flexibility and adaptability will be key. Whether we should expect rate increases next year will depend on a nuanced analysis of economic indicators and a keen understanding of global dynamics. As individuals and businesses, staying informed and agile in response to economic developments will be essential for navigating the uncertainties that lie ahead.

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