Cash Rate Decision June 2024: RBA Leaves Rate Unchanged At 4.35%

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Otto Dargan

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Why Did The RBA Hold The Cash Rate In June 2024?

This decision is rooted in the ongoing challenge of controlling inflation. While inflation has decreased from its most recent peak in 2022, the Reserve Bank of Australia (RBA) noted that “the pace of decline has slowed in the most recent data, with inflation still some way above the midpoint of the 2-3 per cent target range”. This indicates that inflation is proving more stubborn than anticipated, necessitating a cautious approach to monetary policy.

Economic uncertainties also played a huge role in the RBA’s decision. The RBA highlighted that “recent data have demonstrated that the process of returning inflation to target is unlikely to be smooth”. pointing to complexities in the current economic situation. Additionally, the RBA noted that, “Conditions in the labour market eased further over the past month but remain tighter than is consistent with sustained full employment and inflation at target.”

The RBA emphasised the importance of understanding global economic conditions, which are marked by uncertainties. They mentioned that there “remains a high level of uncertainty about the overseas outlook”, which includes risks from geopolitical events and economic performance in key countries like China and the US. These external factors could greatly impact Australia’s economic conditions and inflation path.

By pausing the cash rate, the RBA aims to evaluate the evolving economic landscape carefully and ensure that inflation returns to the target range “within a reasonable timeframe”. The RBA is committed to a data-driven approach, emphasising the need to “remain vigilant to upside risks to inflation” and balance inflation control with economic growth in these unpredictable times.

What Do Our Experts Say About The RBA’s Decision?

Home Loan Experts Senior Mortgage Broker Preeti Kowshik suggested some actions homeowners and prospective home buyers could take to improve their position while rates are on hold.

“Homeowners should review their current mortgage rates and terms to see if refinancing could lead to lower repayments or better terms. This is also a good opportunity to compare different lenders and their offers to ensure you’re getting the most competitive rates and conditions.”

Preeti also highlights the benefits of assessing personal finances and adjusting budgets accordingly, considering potential future changes in interest rates. “A stable interest-rate environment provides the chance to consider optimising savings strategies or investment opportunities, and plan long-term financial goals, such as paying off mortgages faster or saving for future property investments.”

“By being proactive and informed, homeowners and potential buyers can make the most of the RBA’s decision to keep rates unchanged,” Kowshik said.

Home Loan Experts CEO Alan Hemmings provides further insights, suggesting that rate hold was largely expected. “I am pretty sure the market was not surprised that the Reserve Bank left rates on hold,” he notes. Hemmings explained that the RBA is closely monitoring several key factors, including inflation, wage growth and unemployment, all of which have been resistant to change. “Inflation is the main one, but there is also wage growth, unemployment, and what is happening with overall economic growth,” he said. “All of these numbers have appeared to be stubborn in moving where the RBA wants them to go.”

He further points out that upcoming tax cuts could influence decisions later this year. “The tax cuts coming in two weeks will give everyone more money, and I still think there is a chance the next move could be another increase,” he explains. “If the tax cuts hurt inflation, it will mean the RBA has to move to increase rates further. If, however, inflation continues to fall, rates will hold for the rest of the year.

How Does The Cash Rate Affect My Interest Rate?

Lenders add a margin to the official cash rate to determine the variable interest rate they offer to customers. So if you have a variable interest rate, it will almost certainly go up with a cash rate increase.

You can use our repayment calculator to find out what your repayments should look like whenever the cash rate changes.

About the Author

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Otto Dargan

Otto Dargan is the Founder of Home Loan Experts. He is involved in strategic and operational matters. He utilises his time in seeking... [Read More]

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