Media Release | 19 March 2024
Commentary from The Agency's Managing Director and Group CEO Geoff Lucas on the RBA's March 2024 interest rate decision.
As expected we saw interest rates remain on hold at the RBA’s March board meeting.
Given the most recent economic data, I expect little to no change in interest rates for the balance of the calendar year. Although the most recent CPI appeared encouraging, services inflation is proving more difficult to budge than earlier expected. As rents and energy prices comprise a substantial part of services inflation, upward price movements in each of these is expected to challenge further falls in inflation. Further, the July tax cuts are expected to increase average spending power and this coupled with increased government spending possibly outlined in the May Federal Budget are likely to add further inflationary pressure. Whilst it is likely the next move is most probably down, albeit very late 2024 or into 2025, there is a slight, but emerging risk that further inflationary impacts may necessitate a lift in rates before any cuts.
The change in frequency of interest rate decisions will see the obsession around the RBA’s meetings reduce as they are no longer front of mind and as a result the driving force of property price changes are increasingly demand and supply as well as affordability. These factors are creating unprecedented levels of difference in pricing movements within the many state, region and community markets. Never before has it been so critical to analyse specific markets rather than treat the market as a whole. Perth, Adelaide and Brisbane all lead the way in terms of annual and quarterly price gains, and each of these markets has significantly reduced supply.
Given increasing unemployment and continued cost of living pressures, coupled with interest rates higher for longer, we expect the annual national rate of price movement to continue softening, and whilst positive, to grow less than last year’s increase of 8.2 per cent. Lower price and interest rate volatility, together with renewed first homebuyer activity are healthy signs for the residential market and Australian homeowners.