By Chelsea Szabo with AAP
The Reserve Bank of Australia (RBA) has dropped interest rates to 4.1 per cent, down from 4.35 per cent, the first cut since November 2023.
Following the drop, Australia’s four major banks: ANZ, Commbank, NAB and Westpac, all announced decisions to transfer the 0.25 per cent interest rate cut to home loans with variable interest rates.
RBA governor Michele Bullock said the board’s decision was based on decreasing inflation rates.
“Inflation has eased over the past three quarters and in the most recent quarter a bit more than our forecasts had anticipated,” Ms Bullock said.
“It’s clear that higher interest rates have been working as anticipated, restricting economic activity and putting downward pressure on inflation.”
Inflation is currently sitting at 2.4 per cent, down from 2.8 per cent last quarter. The rate has steadily decreased since its peak of 7.8 per cent in December 2022.
Emerald Bell Real Estate Agent Samantha Scott said with interest rates going down, now is a good time to sell.
“The interest rate drop is bringing more confidence back into the market, because the interest rates are going in the right direction,” Ms Scott said.
“[Sellers] think it’ll take a while for house prices to go up, but as soon as we saw that interest rate drop, or even when the media were sprouting it, we got more buyers.”
She said even if agents see a 25 per cent growth in the number of buyers, prices will move quickly in an upward trend because of the confidence in borrowing and the potential for future rate decreases.
However, the RBA governor said this interest rate cut does not mean more are to follow.
“I want to be very clear that today’s decision does not imply that further rate cuts along the lines suggested by the market are coming,” Ms Bullock said.
HSBC chief economist Paul Bloxham has also predicted the Reserve Bank is not going to lower rates going forward.
“This is a fairly strong indication that although the RBA was comfortable cutting today, they will need more evidence of disinflation before they will be prepared to cut again,” he said.
The RBA cited several areas of concern which may affect inflation rates.
Namely, Australia’s high employment rates indicate a strong economy and with the economy performing well, demand for goods increases, leading to higher prices.
The board is also concerned about Australia’s economy slowing due to global “policy unpredictability”, likely referring to the threat of US tariffs.
Treasurer Jim Chalmers said the decision to cut interest rates is the “soft landing” the Labor Government has been preparing for, but there is more that needs to be done.
“We can’t be complacent about the months and years ahead. We know that there is more work to do. We know that this is not the solution to every challenge that people are confronting in their household budgets, but it will help,” Mr Chalmers said.
He said despite the interest rate cut, cost of living will remain the “primary focus” of the government.
