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The first rate pause after a year of increases will give the bank time to assess the full effect of previous rises.
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RBA decision ‘welcome relief’, say experts
05 April 2023
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10 minute read
The RBA’s decision to pause interest rates at 3.6 per cent yesterday was widely welcomed as the correct decision by experts who say businesses and households are struggling after 10 consecutive increases.
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Governor Philip Lowe said the RBA board decided to pause the run of rises to observe their full impact but indicated further increases were still a possibility.
“The board took the decision to hold interest rates steady this month to provide additional time to assess the impact of the increase in interest rates to date and the economic outlook,” said Dr Lowe.
“Global inflation remains very high. In headline terms it is moderating, although services price inflation remains high in many economies.”
“The board expects that some further tightening of monetary policy may well be needed to ensure that inflation returns to target.”
Deloitte Access Economics partner Stephen Smith said based on the available data the RBA had made the necessary and correct decision.
“The move to maintain the cash rate at 3.6 per cent following 10 consecutive rate hikes comes just days after monthly inflation data showed price increases slowed to 6.8 per cent in the year to February, below consensus forecasts,” said Mr Smith.
“It also comes a week after ABS data showed retail trade grew by just 0.2 per cent in February, which represents an overall decline in the volume of goods sold after accounting for inflation and population growth.”
CPA Australia’s senior manager of business and investment policy Gavan Ord said the news would have been warmly received by many but warned against complacency with future increases still a possibility.
“This is welcome relief for businesses and households who have faced rising rates, higher costs and economic uncertainty for months,” said Mr Ord.
“The latest data shows we have had two months of lower annual inflation. While this could indicate inflation has peaked, businesses should still be planning ahead for further volatility.”
“We are facing an unpredictable environment and businesses should not assume rate rises are over. This is not a time for complacency for businesses or governments. We want next month’s federal budget to focus on opportunities to improve business resiliency.”
BDO’s project and infrastructure advisory partner and economist Ally Flint agreed and said the cautious RBA decision had influenced by recent economic data.
“In addition to recent lower than expected monthly inflation figures, global financial market turmoil, falling job ads and weaker consumer confidence have led to a cautious approach from the RBA,” said Ms Flint.
“Given the combined signals that the economy is weakening at a faster rate than anticipated, this is considered a prudent move.”
Principal at Atchison Consulting Kevin Toohey said the RBA board had reached the right verdict and many were confronting economic pain.
“The appropriate decision was made by the RBA to pause interest rates as fixed-rate mortgages will soon roll to variable rates,” said Mr Toohey.
“Today’s decision does not mean that the RBA will soon decrease interest rates.”
“It is important to remember inflation is still high, and the labour market is still very tight. At Atchison we still see more real economic pain to come.”
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