Media Release | 6 June 2023
Commentary from The Agency's Managing Director and Group CEO Geoff Lucas on the RBA's June interest rate decision.
The Agency Managing Director and Group CEO Geoff Lucas said inflationary pressures are again the driver of the RBA’s decision to increase interest rates by 25 basis points to 4.1 per cent at their June meeting today.
"Despite some people’s wishful thinking - inflation is and will continue to prove stickier and harder to move than most people had hoped for," Mr Lucas said.
"Unfortunately for mortgage holders, due to the latest data I don’t think that this will be the last of the interest rate rises and it is also unlikely that we will now see interest rates falls this calendar year.
The news of the minimum wage increase of 5.75 per cent will contribute to inflation when it comes into effect on 1 July due to the increase in costs to businesses and the flow on effects to the costs of goods and services.
While rents are currently rising at an annualised rate of 6.1 per cent in the latest April CPI data, this is based on actual costs as opposed to advertised prices and we are yet to see the 20-25 per cent rental growth that we have seen over last 12 months filter through into the inflation rates. This is a ‘sleeper’ that will continue to have a material upward impact on inflation for months to come.
The inability to knock inflation on its head means that it is now more likely than ever that the mortgage cliff will hit and hit harder than first anticipated. Over 850,000 fixed rate loans are due to roll over to variable rates between July and December this year – so despite a common belief that increases in rates haven’t had an effect – in many cases the rates haven’t actually changed yet, but they are about to go from circa 2 per cent to circa 6-6.25 per cent.
On a positive note the price volatility that has been in the market place is continuing to subside and people can transact with more certainty that they have had in recent months and years. Buyer confidence has been growing as seen with the strong improvement in clearance rates and uptick in prices. We are also seeing a new wave of would be first home buyers who are for the first time ever seeing their deposits grow with material interest being credited to their accounts. Well educated buyers will reap the rewards of the current market conditions."