Media Release | 4 July 2023
Commentary from The Agency's Managing Director and Group CEO Geoff Lucas on the RBA's July interest rate decision
The Agency Managing Director and CEO Geoff Lucas said he had anticipated two interest rate rises over the next three months.
“Today’s decision reflects the RBA’s intention to give consumers a slight break ahead of what I believe will now see interest rate rises in August and September in order to keep inflation in check. This of course is subject to any material changes in inflation, consumer spending and unemployment. The RBA will also be keen to give more time to assess critical economic data specifically the extent to which monetary policy is impacting inflation.
“Already we have a marked increase in the number of investment properties coming to market and increased supply levels gives hopes to first home buyers and the parents of first home buyers who have been waiting for an opportunity to enter the market. The increase in supply will likely dampen any price increases in the near to mid term.
“Whilst demand in recent times has been strong it is fuelled in some cases by borrowers seeking to deploy capital before their pre-approved limits expire. We have seen some loan approvals reduce by as much as 25 per cent following the recent rate rises.
"We expect to see a softening in price increases and possibly further reductions later in the second six months of this calendar year. CBA has recently updated their forecast for price growth of 3% in calendar 2023 – given we have had 3.4% national increase so far this calendar year – this implies an expectation of flat to slightly negative prices.
"Cost of living increases are expected to continue with energy prices set to increase by at least 20%, and only 6% of the circa 20% national rental increases are so far included in the CPI. These factors are likely to mean inflation will remain higher for longer than many had initially expected. Coupled with the more than 1.2 million fixed loans of circa 2% that will roll onto variable rates of 6% plus in the next nine months, this creates an environment conducive likely softening.
“Looking further ahead we are unlikely to see interest rate falls for some time. The inability to arrest underlying inflation means that interest rates are likely to be higher for longer than first thought. Those buyers who are prepared and who have been diligently saving will be able to take advantage of the market conditions due to the reduced volatility.”