The Reserve Bank of Australia has defied speculation among economists and banks, leaving rates on hold.
The bank had been widely expected to deliver Australian borrowers a third rate cut in five months, after its board meeting ended on Tuesday afternoon.
Instead, it left the official cash rate untouched at 3.85 per cent.
A further cut would have saved home-owners about $90 a month on a typical $600,000 mortgage.
An enduringly strong jobs market and home prices trending higher suggest the Australian economy is still in decent shape, proving enough to keep the central bank cautiously on the sidelines for a bit longer.
The RBA board said maintaining price stability and full employment was the priority.
“The board judged that it could wait for a little more information to confirm that inflation remains on track to reach 2.5 per cent on a sustainable basis,” the post-meeting statement read.
“It noted that monetary policy is well placed to respond decisively to international developments if they were to have material implications for activity and inflation in Australia.”
Tuesday’s decision to hold follows a 0.25-basis-point cut in May, the last time the central bank board met. Economists had generally agreed another downward move was on the way.
Economists at Commonwealth Bank, ANZ and NAB had predicted a further cut in August, while Westpac has tipped a pause before another cut in November and two more in 2026.
That would send the cash rate to 3.15 per cent and amount to 135 basis points worth of cuts in the space of about 12 months. In all, that would shave almost $500 a month in repayments off a typical $600,000 mortgage from before February.
With homebuyers armed with much more purchasing power in recent months, demand and prices are set to surge.
Home values rose 1.4 per cent in the June quarter, according to property analytics company Cotality, while auction clearance rates have held above 70 per cent for the past four weeks.
While this year’s earlier cuts have delivered relief for cash-strapped buyers, most of those with variable mortgages have not lowered repayments as interest rates have fallen.
CommBank, which holds about a quarter of the mortgage market, said just one in 10 customers had reduced their repayments after the Reserve’s last cut to the official interest rate in May.
“Only a small percentage of customers are freeing up their cash, while most are maintaining higher repayments to get ahead on their loans,” said Tess Sutherland, general manager of the bank’s home buying team.
“We also found that those in their 30s and 40s were the most likely age group to reduce their repayments – perhaps not surprising, given many in this cohort may be juggling school-aged kids and high household costs.”
-with AAP
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