Media Release | 4 April 2023
Commentary from The Agency's Managing Director and Group CEO Geoff Lucas on the RBA's April interest rate decision
The Agency Group CEO Geoff Lucas said the decision to hold interest rates steady at 3.6 per cent was broadly expected by financial markets, however he had expected at least one more rise in this cycle.
“I am concerned that the RBA’s inaction will give some consumers false hopes. The RBA is trying to give consumers some relief however the reality is unemployment at 3.5 per cent remains near a 50 year low and the economy is still showing signs of strength, and it may have been prudent to deliver one more rise in this cycle.
“This decision is good news in the immediate term for variable rate mortgage holders who have come under increasing pressure over the past ten months. We expect further sentiment improvement in coming weeks as borrowers now feel we are at the end of the current tightening cycle.
“It also brings forward an improved transactional environment where vendors will see higher levels of demand and a likely increase therefore in sales volume.
“However, it could be premature, while it could be argued that inflation fell from 7.4 per cent to 6.8 per cent it still has a long way to go to be within the RBA target range.
“Although we have seen evidence of reductions in retail spending, yesterday’s OPEC decision in reducing oil output, means we can expect further inflationary pressure from the increase in fuel prices.
“Recent Core Logic data also highlights positive consumer sentiment translating into property prices hike of 1.4 per cent in Sydney and 0.6 per cent across Australia respectively.
“Recent home price rises especially in Sydney and Melbourne also reflect improving sentiment, although this has been assisted by some of the lowest sales activity in these cities over the past 28 years. Sales in NSW are 22.7 per cent down on the first three months of the year compared to last year with Victoria down 28.6 per cent for the same period.
“This data is symptomatic of consumers thinking that things are better than what they are. In fact, low stock volumes and record immigration played a contributing role in the increase in property prices. This month was an opportunity for the RBA to further dent the persistent inflationary risk that now remains.
“We remain cautious, as there are many factors that suggest inflation is stickier than some of the wishful thinking suggests, and whilst there is an expectation of interest rate cuts into 2024, it is possible the next move may be upward if inflation proves more resilient than many would hope.
“What however appears certain is that we are now entering a period of reduced volatility in interest rate moves and as a result a more stable and safer transactional real estate market.”