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RBA Rates Update Sep 2023

05.09.23 | Marc Barlow | Reserve Bank Announcements

RBA’s third rate pause in a row


Today the RBA held the official cash rate at 4.10% for a third consecutive month.


At outgoing Governor Dr Phillip Lowe’s final board meeting on monetary policy, the RBA maintained its steady as she goes approach. 


Despite inflation being well above the target of 2–3%, the RBA today said it expected it to be back in target range by ‘late 2025’. 


‘Inflation in Australia has passed its peak … but inflation is still too high and will remain so for some time yet. Rent inflation is also elevated.’

But the RBA kept its options open, adding, ‘some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will continue to depend upon the data and the evolving assessment of risks.’

Speaking of data, Roy Morgan research estimates the number of Australians facing the risk of mortgage stress has increased by 642,000 over the past 12 months, as the RBA swiftly hiked rates. 

However, some financial experts are suggesting that although rates now are at – or very close to – their peak, there are plenty of indicators suggesting they’ll stay near the current level well into 2024. 

While inflation seems to be gradually coming down (good), GDP is stuck at a low rate (bad). GDP (gross domestic product) is the main measure of economic health. It measures the value of all products and services created in Australia. 

The RBA is forecasting GDP growth of around only 1.75% over next year; a low number historically. It’s only when interest rates fall – injecting more cash into the economy – that GDP is likely to increase.

This scenario puts pressure on the RBA from opposite directions. Lowering rates will increase GDP, but will put extra pressure on inflation. Keeping rates high reduces inflation, but threatens to push the economy into recession. 

The next few months will be a test of how well the Reserve can walk this tightrope. 

For global context, Australia’s current rate isn’t as high as New Zealand and the USA (both around 5.5%). And in Turkey, it’s an eye-watering 25%. 

The RBA added that it decided to hold interest rates steady this month, to ‘provide further time to assess the impact of the increase in interest rates to date and the economic outlook.’


So, plenty for the new RBA Governor Michele Bullock to ponder as she starts her seven-year tenure on September 18. 


The next monetary policy update is 3 October. 


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