RBA leaves interest rates on hold
Luca Ittimani
The Reserve Bank has left interest rates on hold at 3.6%, in a widely expected move.
Economists were confident the bank would hold today and are now parsing the RBA board’s statement for signs a fourth rate cut could still come this year.
The board has cut interest rates three times in 2025, most recently in August. Inflation has been on the rise in recent months but remains within the bank’s 2-3% target range.
We’ll bring you market reaction and more in a moment.
Photograph: David Gray/ReutersShare
Updated at 06.31 CEST
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Patrick Commins
S&P Global Ratings affirms Australia’s top AAA credit rating
S&P Global Ratings has affirmed Australia’s top AAA credit rating, pointing to our country’s “sound fiscal metrics” and relatively low debt levels against overseas peers.
A day after official figures confirmed that the budget tipped back into a small deficit in 2024-25 after two straight surplus years, S&P provided a tick of approval for the national finances.
S&P said it expects the general government deficit (which includes the states and territories) “to steady at 1.5-2% of GDP over the next few years, as commodity prices normalise from highs over 2023-2024”.
It also said:
Net general government debt is lower than that of most advanced-economy peers and will likely remain below 30% of GDP.
The New-York based organisation pointed to “sagging” productivity but said it expected economic growth to pick back up as lower interest rates flow through to the increased activity.
S&P don’t think US trade tariffs will have much of an impact on our economy.
They also have some nice things to say about the country more broadly:
National institutions are stable and provide checks and balances to power. Australia has strong respect for the rule of law, free flow of information, and open public debate on policy issues.
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Reserve Bank governor says there’s ‘nothing I can do personally’ about housing prices
Bullock has acknowledged that Australians who are facing the prospect of never breaking into the housing market are in a “very, very difficult situation”, but downplayed the Reserve Bank’s role in guiding property prices.
She has said:
As an individual and as a citizen, I think it’s we’re in a very difficult position with the property market and I don’t actually think that most reasonable people think that this is a good outcome.
Having said that, there’s nothing that I can do personally about it.
Can we impact housing prices or should we impact housing prices? No. We have to focus on our mandate, which is inflation. I’ve said a number of times before, the problem in the housing market is a structural deficit of supply. That is the problem.
So the bottom line is that all I can do is make sure I keep inflation low and stable, and I keep employment as strong as possible because that gives people the best opportunities to get jobs and be able to possibly get into the market.
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Updated at 08.08 CEST
Bullock has been noncommittal when asked by journalists about the potential for future rate cuts based on different inflation indicators, saying she doesn’t want to give forward guidance.
She has said:
I’m not going to predict what the interest rate is going to be in the next three to six months.
What I’m saying is that we have got a situation now, which is actually quite a positive situation. We have inflation back in a 2% to 3% band, both in underlying and headline.
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Updated at 08.08 CEST
Reserve Bank governor says RBA aiming for ‘low and stable inflation’
Bullock has been asked about her previous statements that, in general, the price of things will never go back to what they were before the pandemic and the massive spike in inflation that followed it.
She’s reiterated that “the fact is that prices have risen and they’re staying up there permanently” but said the Reserve Bank is trying to maintain “low and stable inflation” rather than getting prices to go deflate or go backwards.
Bullock said:
Deflation is not good for businesses. It’s not good for making investment decisions.
That’s why low and stable inflation is best when it’s in the background and it isn’t influencing decisions.
But I just want people to understand that when we’re lowering inflation, that doesn’t mean we are lowering the price level.
We’re lowering the rate at which prices are increasing.
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Updated at 07.46 CEST
Michele Bullock says ‘price level isn’t coming back down’
The governor of the Reserve Bank of Australia (RBA), Michele Bullock, is holding a press conference in Sydney to shed some light on why the bank decided to keep interest rates steady at 3.6%.
Bullock has said monetary policy works with a lag, so the full effect on the economy of the three interest rate cuts the bank has agreed on this year “are yet to be seen”.
She’s also said that, while inflation remains within the Reserve Bank’s target range, recent data “indicate there could be a bit more upward pressure than we thought”, and that:
We know that high inflation has pushed up prices across the board over the past few years.
While inflation has fallen a lot, the price level isn’t coming back down and this higher price level affects everyone.
And it’s been especially tough on people of lower incomes and the more vulnerable. This is why it’s so important to keep inflation low and stable and unemployment as low as possible.
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Updated at 07.45 CEST
Coalition’s Ted O’Brien blames government spending for RBA rates decision
The opposition’s Treasury spokesperson, Ted O’Brien, has been speaking live in Brisbane where he criticised the government after the Reserve Bank’s cash rate decision.
O’Brien has said his heart goes out to mortgage holders and young Australians wanting to get into the housing market, and blamed the bank’s decision not to cut rates on the Albanese government’s economic management.
Not happy. The shadow treasurer, Ted O’Brien, says the RBA didn’t cut the cash rate because the government is spending too much. Photograph: Dean Lewins/AAP
He’s noted that the Reserve Bank pointed to inflation in the September quarter being higher than expected when it decided to keep rates steady at 3.6%, and claimed this is a “direct consequence of the Albanese government’s spending spree”.
He said:
This government is spending $160bn extra … this financial year compared to when the Coalition was in government.
Clearly, the RBA has very little wriggle room. The market is estimating that there might perhaps be just one more rate cut now [this year].
If that comes to fruition, while welcomed, it means that the average mortgage holder will be paying $1,700 more every single month in interest payments rather than today’s $1,800.
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Updated at 07.29 CEST
Chalmers acknowledges RBA rate decision disappointing for mortgage holders
The treasurer, Jim Chalmers is addressing reporters from Melbourne after the Reserve Bank held interest rates steady at 3.6%.
The bank’s decision was widely expected, but mortgage holders will still be disappointed that their repayments won’t fall at least until later this year.
The treasurer, Jim Chalmers, acknowledges the RBA’s decision was not what mortgage holders wanted to hear. Photograph: Joel Carrett/AAP
Chalmers acknowledged that was disappointment, saying:
This is not the outcome that millions of Australian homeowners would have wanted but it’s certainly the outcome that markets and economists were expecting.
The treasurer has been repeating some of his classic lines – emphasising the bank’s independence, saying that he doesn’t pre-empt its decisions and declining to comment when asked if he’s concerned it won’t bring rates down further.
He said:
I don’t engage in that kind of commentary. We’ve seen interest rates cut three times already this year.
When we came to office, interest rates were already rising. Inflation was around double what it is now and rising fast.
We’ve been able to get inflation down. We’ve seen interest rates cut multiple times. As a consequence we’ve got real wages growing. We’ve kept unemployment low.
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Updated at 07.22 CEST
Catie McLeod
Good afternoon, I’ll take you through the rest of today’s news.
ShareNick Visser
That’s all from me! Catie McLeod will be your shepherd for the rest of the arvo. Take care.
ShareLuca Ittimani
Markets bet against rate cuts after RBA warns inflation higher than expected
The Reserve Bank board has said inflation could be higher than it predicted as the economy picks up speed faster than expected, dampening hopes for another rate cut in 2025.
The bank’s interest rate board unanimously voted to leave rates at 3.6%, saying there were signs prices were still rising too fast. In a statement accompanying its decision, the board said:
Inflation in the September quarter may be higher than expected …
With signs that private demand is recovering, indications that inflation may be persistent in some areas and labour market conditions overall remaining stable, the Board decided that it was appropriate to [hold].
The RBA is worried inflation could persist for longer than expected. Photograph: Mick Tsikas/AAP
The board judged household consumption was strengthening and taking over from government spending as the main driver of Australia’s economy, alongside business activity. It believed interest rates were low enough for those who needed to borrow.
Private demand is recovering a little more rapidly than expected … Credit is readily available to both households and businesses.
The Australian dollar rose above 66 US cents in the wake of the announcement and the Australian share market slipped, in a sign markets expect a longer wait for rate cuts.
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Updated at 07.00 CEST
