The RBA held the cash rate today, but as consumer finance expert Joel Gibson explains, household budgets are still under real pressure.
The Reserve Bank of Australia held the cash rate at 4.35 per cent at its August meeting, choosing not to add a fourth increase to the three delivered earlier this year. For business owners hoping for some breathing room, the decision offers a pause rather than relief.
Annual headline inflation eased to 3.8 per cent in the year to June, down from 4.0 per cent in May, according to the Australian Bureau of Statistics. The RBA’s preferred measure of underlying inflation, the trimmed mean, held steady at 3.6 per cent. Housing costs remained the biggest driver of the increase, up 6.8 per cent over the year.
Joel Gibson, consumer finance expert at Zyft, says the hold shouldn’t be mistaken for good news.
“Homeowners might be breathing a sigh of relief that rates haven’t gone up again today, but there’s not much to celebrate. Rates remain at their equal-highest level since 2011, and after three rises already this year, households are still feeling the squeeze.”
Rates on hold, not down
According to Gibson, the cumulative effect of this year’s earlier rate rises is still working through household budgets, with the major banks not tipping meaningful relief until 2027. He points to grocery costs as a further pressure point, citing Zyft’s own price tracking of supermarket staples at Coles and Woolworths since January, which the company says shows sharp increases across everyday items including beef mince, butter and fresh milk.
“The squeeze goes well beyond mortgages. Headline inflation is sitting at 3.8%, with some of the biggest increases coming from the things households simply can’t avoid.”
Gibson argues that when multiple costs rise at once, mortgage repayments, groceries, energy and insurance among them, household budgets have little room left to move, and that’s changing how Australians spend.
“Australians are becoming much more deliberate about where their money goes. When household budgets are under this much pressure, consumers are less willing to take a price or promotion at face value, they’re comparing more, questioning whether something is genuinely a good deal and looking for value before they spend.”
Rate hold attributed to Oliver Hume Property Group chief economist, Matt Bell
For the second meeting in a row, financial markets agreed completely with surveyed economists and gave virtually no chance of a rate hike today. And consistent with every decision this year, the RBA delivered in line with market expectations. Before today’s decision markets had priced in ~96% chance of no change.
June inflation coming in below market expectations and in line with RBA forecasts was enough to offset ongoing strong household spending and a persistently low unemployment rate and keep the RBA on a watch-and-see pattern after the 0.75% of rate hikes in February, March and April.
Markets have just below a 50% chance of another 0.25% hike by December, with that rising to just over 50% by March 2027, with cuts commencing in the second half of 2027 at the earliest.
So, since the last decision in early June, we’re back to the same point: a real possibility we are at the peak of the rate cycle, having reversed all of 2025’s cuts. What is the outlook for property?
Now that a lot of the hysteria around the budget taxation changes for investors has died down, rates remain the main driver of the short term outlook. The fundamentals haven’t changed. Demand exceeds supply in most markets and household budgets remain in good shape.
Consumer sentiment is rising off recent lows and weekly auction clearance rates hit 11-week highs on the weekend. Land market volumes were slightly down nationally in the June quarter and still slow in July and price growth in most markets remains strong as demand remains robust.
Clearly the outlook for property for the September quarter remains soft, both for new and established markets but with the outlook for rates for the remainder of 2026 and into 2027 stabilising, we expect to see a return to the pre-crisis path of activity by early 2027.
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