No relief in sight: RBA tipped to maintain 4.35% cash rate

The cash rate is unlikely to ease from its 12-year high of 4.35% following the RBA board’s June meeting, with mortgage relief potentially even further away than expected.

The cash rate impacts the overheads of banks and lenders, with shifts typically leading them to cut or hike the interest rates offered to borrowers.

The RBA board entered into its June meeting this morning with its decision to be announced tomorrow afternoon.

Its goal will likely be to slow the Australian economy without causing a recession - a so-called 'soft landing'.

But such an occurrence, if still possible, might be further away than was previously expected.

Meanwhile, nearly $14.7 billion worth of residential home loans were behind in repayments by between 30 and 89 days as of March 2024, per the latest APRA data.

This marks a 40% year-on-year increase in arrears.

The RBA hiked the cash rate from 0.1% in May 2022 to its current level of 4.35% in November 2023.

This has the typical interest rate on a new owner-occupied home loan from a low of 2.9% p.a. to its current level of 6.3% p.a.

As a result, monthly repayments on an average new home loan - worth $626,000 in April - have jumped more than $1,250 to $3,875 a month.

See also: Mortgage Repayment Calculator

RBA won't cut until 2025: ANZ

ANZ was the first of the big four banks to delay its forecast for the first interest rate cut last week.

It now predicts the first bout of relief will come in February - three months later than its previous prediction.

"Getting an appropriate balance between the level of demand and supply is likely to take a little longer than expected," ANZ head of Australian economics Adam Boyton said.

The bank's change of heart was driven by stronger-than-expected household spending, ongoing strength in the jobs market, and the impact of government spending on inflation.

Not to mention, the upside surprise brought about by the latest quarterly inflation data.

While it may take longer than some hope to get inflation under control, there were positive signs within the latest gross domestic product (GDP) reading.

It found growth in the Australian economy slowed to 0.1% in the March quarter.

"GDP growth was weak in March, with the economy experiencing its lowest through the year growth since December 2020," ABS head of national accounts Katherine Keenan said.

Other big four banks more optimistic of near-term rate cut

So far, ANZ is alone in reassessing its interest rate forecast.

CommBank, NAB, and Westpac all continue to expect the first cash rate cut to come in November.

The former bank anticipates this month's call will be a "straightforward decision" for the RBA board.

"The Federal Budget was a little more expansionary than expected but we do not expect it to have shifted the RBA's assessment of the economic outlook," CommBank senior economist Belinda Allen said.

All three banks predict the central bank won't relax its language regarding near-term expectations, maintaining a continual refusal to "rule anything in or out".

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