The Reserve Bank of Australia (RBA) has delivered another blow to homeowners and borrowers, confirming that interest rate cuts are off the table until at least 2025. This comes as a shock to many Australians who were hoping for some relief from the ongoing cost-of-living pressures.

The RBA’s decision to maintain interest rates at their current level reflects the ongoing battle against inflation. While the bank acknowledges that the economic outlook is uncertain, they remain steadfast in their commitment to bringing inflation back to target.

Can we believe the RBA this time around?

This latest announcement raises questions about the RBA’s credibility. In the past, the bank has been criticised for underestimating the severity of inflation and being slow to react to rising interest rates.

Given this history, many Australians are understandably skeptical about the RBA’s current forecasts.

Who can forget the media constantly saying that rates won’t go up until 2024 and the RBA told us so.? While there’s plenty of debate about whether or not that was true (we like to think that you needed to read the whole statement, not focus on one part of it), the fact remains that many people believed it.

Adding to the uncertainty, RBA Deputy Governor Andrew Hauser recently warned Australians against “false prophets” – believing those who claim to know the future direction of markets and interest rates.

Hauser emphasized the complexities of economic forecasting and the importance of considering a range of possible outcomes.

What has the RBA actually said?

In their post-meeting press conference, Michelle Bullock said a near-term cut in interest rates wasn’t on the cards, and she wasn’t expecting Australia to fall into recession at this point.

She said the board only considered lifting rates, or keeping rates steady.

“Based on what I know today … what we can say is that a near-term reduction in the cash rate doesn’t align with the board’s current thinking,” she said.

“We’ve seen from overseas experience how bumpy inflation can be on the way down and across the economy, we need to see demand and supply coming back into better balance.

“I understand that this is not what people want to hear. I know there are many households and small businesses that are struggling with interest rates where they are.

“Are we heading for recession? I don’t believe so, and the board doesn’t believe so, because we still believe that we’re on that narrow path.

“Having said that, we are data dependent, and there’s a number of things … that could result in the economy slowing much more quickly than we expect and we need to be alert to those.

“If they come to pass, then yes, interest rate cuts would be on the agenda,” she said.

What does this mean for you?

• Brace for the long haul: Interest rate relief is NOT on the horizon.
• Review your financial situation: Assess your budget and explore options for managing higher repayments.

Scott Spencer, CEO of Well Money, commented on the decision: “The RBA’s decision to extend the interest rate pain is a bitter pill for Australian homeowners to swallow. While it’s crucial to address inflation, it’s equally important to consider the immense financial strain on households. It’s essential for homeowners to reassess their financial plans and explore options to protect themselves from further rate hikes.”

It’s important to remember that the economic landscape is constantly evolving, and the RBA’s stance could change. However, based on current information, Australians should prepare for a prolonged period of higher interest rates.