Restrictive rates & reality: Our take on today’s RBA decision

The RBA has moved again.

A third consecutive 25-basis-point increase takes the official cash rate to 4.35%, the highest it has been in over a decade. Three hikes in eleven weeks. The cumulative effect on variable-rate borrowers is real, and we’re not going to pretend otherwise.

But before the headlines do what headlines do, here is the ground-level read on today’s news.

Why the RBA moved

This was not a "split and finely balanced" decision. The RBA board moved with a decisive 8-1 vote, signalling that they have officially entered restrictive territory to curb inflation which is currently running at 4.6%.

The primary driver is a dual-threat economy:

• The Global factor: The ongoing Middle East conflict has pushed oil prices above $US114, with Governor Michele Bullock warning that this fuel shock will likely be felt for the rest of the year, even if the conflict is resolved quickly.
• The Domestic factor: Underlying inflation remains high at 3.3%, and capacity pressures within the Australian economy were already a concern before the war began.

What it means for borrowers

On a $750,000 loan, today’s rise adds roughly $118 per month to repayments. Stacked against the February and March moves, the cumulative impact is around $354 per month since the start of the year.

If you are on a variable rate, now is the time for a health check on your current mortgage. Reach out to our partners at Shore Financial to ensure your pricing is sharpened for this new environment.

What it means for buyers

Each 0.25% move reduces borrowing capacity by approximately $25,000. While this forces some to revisit price points, the restrictive setting has a way of filtering the market. The buyers we are seeing at inspections right now are not casual browsers; they are committed and motivated.

What it means for sellers

Winter listings are contracting across our markets, and with the RBA targeting a rise in unemployment to 4.7% by 2028, the "wait and see" strategy is becoming increasingly risky.

In a restrictive market, pricing is everything. Campaigns priced correctly from day one are clearing quickly. Those that miss the mark are being recalibrated by week three, which is a cost that is almost always higher than getting the price right at the start.

The productivity gap & AI

Governor Bullock noted today that high inflation is taking "businesses' eyes off the ball" regarding productivity. She suggested that the AI-inspired investment boom might be the only thing offsetting this global supply shock. We agree; there is no point in putting life on hold in a market brimming with opportunity. We are leaning into technology and efficiency to ensure our clients stay ahead of the curve while others are distracted by the noise.

What comes next

The RBA has left the door open to further tightening, stating they will "do what they consider necessary" to return inflation to target. With headline inflation expected to peak at 4.8% in the June quarter, the pause many hoped for may still be some way off.

Our view: Our markets are underpinned by genuine scarcity of quality stock and long-term demand. As we move into winter with diminishing stock, those with a clear strategy will find the most success.

If you’re seeking a strategy to cut through the noise, let’s have a conversation today.