Is this the end of the cycle?

Well, there it is!

Opinion was divided on whether the RBA would move the cash rate this month, with some bracing for another round of belt tightening. (Personally, I thought they would be reluctant to do so during the changeover period from one governor to another).

A collective sigh of relief could be heard at 2.30pm yesterday when their decision to hold the cash rate at 4.1% was announced. The question now is, with inflation on the (albeit snail’s pace) decline, will the next rate change be up or down?

Without going into the minutiae of economics, the main considerations for the RBA when making these decisions are inflation, retail spending, GDP, the housing market, the unemployment rate, productivity and wages growth.

As per usual, economists’ opinions vary, with some having already called the peak in the rate lifting cycle while others believe there will be one more increase in the coming months. Fuelled by a tight labour market, and the belief that this will drive wage growth and inflation, yet another group are pricing in two more rate hikes. The RBA hasn’t ruled any of this out.

When it comes to the property market, the ripple effect of differing forecasts adds to uncertainty and diminished confidence in the market. While a pause on interest rates is a good thing for mortgage holders, consumer confidence and housing activity go hand in hand.  

Housing values are continuing to rise, however the rate of growth has slowed over the past two months. Stock levels were seasonally low in the first half of the year and the imbalance between supply and demand was keeping prices strong. With more stock filtering into the market, greater choice for buyers reduces the urgency and FOMO and in turn eases price growth.