RBA Holds at 4.35% — But Door Left Open
The Reserve Bank of Australia left the official cash rate unchanged at 4.35% following its August 11 board meeting — the third consecutive hold after the May hike. But the accompanying statement made clear that the pause is conditional, not a pivot.
Why Not Cut?
Markets had briefly priced in a small probability of a cut, driven by weakening housing data and softer consumer spending. The RBA dismissed this, pointing to:
- Services inflation at 4.0% — still above the 2–3% target band
- Labour market resilience — unemployment at 4.1%, below the RBA’s estimate of full employment
- Wage growth at 3.9% annual, running ahead of productivity growth
- Consumer spending — stronger than expected in Q2
The Hawkish Hold
The key signal: “The Board will not hesitate to raise the cash rate further if the incoming data suggests that inflation is not returning to target within a reasonable timeframe.”
Financial markets interpreted this as a 40% probability of one more hike before end-2026, with rate cuts now pushed to mid-2027 at the earliest.
Impact on Property
Variable mortgage rates remain at an average of 6.2% for owner-occupiers. The major banks’ assessment rates for new lending have crept higher despite the cash rate pause. The message is clear: borrowing costs will remain elevated for longer than the mid-2025 easing cycle suggested.
What Changes the Picture
- October CPI — a materially lower print could shift the RBA to a neutral stance
- Unemployment — a jump above 4.5% would harden the case for cuts
- Global rates — the US Federal Reserve’s next move remains critical for currency and capital flows
Bottom Line
The RBA is in a holding pattern, but it’s a holding pattern with teeth. The property market should plan for rates at or above 4.35% through to mid-2027.
