After 10 consecutive rate increases, the RBA has finally announced a pause.
Economists say it will help ease the pain many are facing but won’t make things easier.
Chief economist for Bendigo Bank, David Robertson, said after the decrease in inflation rises, it was the right choice for the Reserve Bank of Australia (RBA) to make.
“I think it was a very sensible decision after the recent economic data and the developments overseas [the collapse of Silicon Valley Bank in the USA],” Mr Robertson said.
“They’ve now had enough evidence that the 3.5% rate hikes thus far have had an impact on inflation, on households and on businesses.
“The question was always ‘how much monetary policy tightening was needed to address inflation’, and I think they have correctly come to the conclusion that 3.5 per cent is enough.”
He said the decrease in inflation rises was proof of that.
“They are maintaining their tightening bias, and they’re warning that further increases may be necessary.”
Mr Robertson said the rate pause won’t relieve financial burdens, but it may ease the pain.
He said the danger of inflation rising once again was small.
“If they keep rates here, it’s still restrictive, but it means they don’t need to inflict even more pain on households if they feel they’ve done enough to discourage spending.”
During covid, fixed rate mortgages increased from 15 per cent to 46 per cent of all home lending.
Mr Robertson said those with a fixed rate mortgage, who would soon be going onto a variable rate, may be in “hot water”.
Some homeowners coming off a fixed rate are facing an increase of almost $3000 a month, according to data from RateCity.
But Mr Robertson also said these homeowners were better prepared than one might think.
“Monetary policy is a blunt tool – it’s going to be challenging,” he said.
“Those who are on a fixed rate are yet to feel that, but they know it’s coming.
“RBA data shows that a lot of those households have built a buffer.”
According to Mr Robertson, the impacts of the rates pause won’t be felt by renters.
“It won’t provide relief. It just means there won’t be even more pain,” he said.
“Some steps have been taken [for renters], but the question is: is it enough?”
He said future rate rises are completely dependent on the future of inflation.
“It was a pretty clear decision this month that they will hold, but next month will be very lineball,” he said.
“I’m hopeful that we’re in for a prolonged pause, but I certainly can’t rule out one more hike.”
Inflation data is revealed on 26 April.
