RBA hands down September cash rate decision

Eleanor Creagh, Proptrack senior economist, explained how the RBA is continuing to frontload its hiking cycle in order to ensure “inflation expectations remain anchored around its two-to-three per cent target.”

“Today’s rate hike will further increase borrowing costs and reduce maximum borrowing capacities, pushing property prices further down. The level of interest rates will be a key factor of housing market conditions and the pace and depth of home price falls in the period ahead,” Ms Creagh said.

CreditorWatch chief economist Anneke Thompson added that with retail trade, labour force and business sentiment data pointing to continual economic heat the central bank isn’t shying from its goal of stemming inflation.

“We expect that the RBA will not hit the pause button on cash rate increases until retail trade data starts to better reflect downbeat consumer sentiment.”

Mrs Thompson believes this shift could occur as soon as the Christmas period, owing to the fact that “mortgage holders will be really feeling the effects of higher repayments, and of course higher prices of everything from furniture, to eating out and to holidays.”

The complexity for the RBA remains around the record unemployment rate after NAB’s Business Conditions survey indicates that many businesses are operating at record capacity. Pair this with low migration and Ms Thompson explained “the labour market is poised to remain tight for some time.”

“The risk is that this encourages continued high consumption, even when sentiment is low, and the RBA is forced to continue to increase the cash rate target.”

“On the flip side, households are finally starting to work through their savings, which could start making more consumers pull back their spending. The question is will consumers be spooked enough by their savings falling to reduce their spending, even if job security is so high?”

She concluded that “retail spending data, coupled with the now exceedingly important anecdotal data from the major retailers, will give us further insight over the next few months.”

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