Reserve Bank of Australia Governor, Philip Lowe, has given his strongest indication yet that a pause in rate rises is on the cards.
Speaking at an Australian Financial Review summit in Sydney, the head of the RBA stated that while inflation was “still too high”, Australia’s modest increases in wages so far have left the nation “in a better position than some other countries”.
He indicated that the full impact of rate rises on the economy was yet to be made apparent, and that the bank may take a “pause” to assess the economic landscape.
“With monetary policy now in restrictive territory, we are closer to the point where it will be appropriate to pause interest rate increases to allow more time to assess the state of the economy,” Dr Lowe said.
The language was stronger than that used in Dr Lowe’s statement on Tuesday announcing the latest rate increase from the RBA.
Dr Lowe’s comments came after the RBA board decided to increase the cash rate for the tenth consecutive meeting, bumping it up by 25 basis points to sit at 3.6 per cent.
Dr Lowe acknowledged the increase in borrowing costs was already causing difficulties for some households.
He also discussed the impact the rate rises have had on Australian households.
He noted that mortgage payments would rise to a record 9.5 per cent share of household disposable income later this year, The Guardian reported.
Housing values were also declining, but Dr Lowe said it was “difficult to determine the effect of this on spending as there had earlier been a large run up in prices”.
Dr Lowe’s hints of a rate pause came as some members of the property industry criticised him for pushing ahead with rate rises despite a slowdown in inflation figures.
Real Estate Institute of Australia President, Hayden Groves said the latest rate increase reflected the RBA’s disregard for mortgage holders.
“The interest rate rises have already added a great burden with a $600,000 mortgage collectively now up by a staggering $1100 per month,” Mr Groves said.
Mr Groves said that the latest decision from the RBA also appeared to ignore recent economic data.
“The January monthly inflation eased by 1 percentage point to 7.4 per cent for the year and GDP growth is slowing down,” he said.
“Wage growth has also been modest, dispelling fears of a wage price spiral.”
Real Estate Institute of Queensland CEO Antonia Mercorella also criticised the RBA’s decision.
“While we were forewarned that we would see another cash rate rise today, it’s concerning that it is happening at such a rapid-fire pace with 10 out of 10 consecutive rises and little impact to inflation,” Ms Mercorella said.
“You’ve got to be wondering when the RBA might stop and think whether this approach is still the right course of action, because while they are aiming to reduce inflation via these consistent rate hikes, it’s clearly not working.”
Ms Mercorella said that further RBA rate rises would do little to tackle the areas of the economy driving up inflation.
“Interest rate increases do nothing to address the cost-of-living crisis that these factors are driving,” she said.
“It cannot be left to mortgage holders to do all the heavy lifting to fix our economic woes.”