What will be the final announcement of Philip Lowe’s RBA rates? Experts predict good news for homeowners
Households are likely to receive a reprieve from interest rates when the Reserve Bank board convenes Tuesday afternoon for the final cash rate call with Governor Philip Lowe at the helm.
As inflation eases and consumer spending deteriorates, markets expect cash rates to remain unchanged at 4.1 percent for the third month in a row.
Despite the RBA’s interest rates at its July and August meetings, a new analysis from PropTrack showed that mortgagers were finding it increasingly difficult to meet repayments.
“Paying off a mortgage is nearly as difficult as it ever was, just below its 1989 peak,” the PropTrack report said.
In addition, new ABS data released on Monday — which showed corporate earnings plummeted in the June quarter and household spending also fell in July — bolstered economists’ expectations that the Reserve Bank would leave rates unchanged.
Households are likely to face a rate cut when the Reserve Bank board meets Tuesday afternoon
The new numbers were likely further confirmation that the RBA’s strategy of pursuing the most aggressive monetary tightening cycle in a generation has successfully acted as a handbrake on economic activity.
Corporate profits in the mining sector fell 21.3 percent in the June quarter, or $11.6 billion, according to the latest business indicator data from the ABS.
Outside of the mining sector, corporate profits fell a smaller 5 percent compared to the March quarter. Significant declines were recorded in the accommodation and food sector, with a fall of 23.6 percent, and in the manufacturing sector, with a fall of 8.6 percent.
The fall in mining profits was the main driver, contributing four-fifths of the total drop in quarterly profits.
Just a year ago, corporate profits rose 28.6 percent in the year to June 2022.
“The commodities sector has experienced a period of strong profits due to high commodity prices since the war in Ukraine. But commodity prices fell significantly in the June quarter on the back of weakening global demand and the worsening outlook for China,” said Commonwealth Bank economist Stephen Wu.
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Economy-wide sales numbers were also weak, falling 0.3 percent as deteriorating consumer confidence and weak consumer demand weighed on domestic demand.
Separate data shows that household spending fell overall in June as the persistent cost of living and high interest rates put pressure on household budgets.
Discretionary purchases fell 3.3 percent in the June quarter, with clothing and footwear falling 7.5 percent, furniture and home appliances falling 7.9 percent, alcohol and tobacco falling 4 percent, and recreation falling 3.9 percent.
Households with an average mortgage size of $585,000 are now paying $1,415 more monthly than before the RBA began its current tightening cycle in May 2022.
A surprise rate hike of 25 basis points would increase average monthly repayments by another $96.
Current Deputy Governor Michele Bullock, who was announced in July as Lowe’s successor, will take the lead as Australia’s chief central banker from September 18.