Is The RBA Finished Hiking?

The RBA today left rates steady at 4.1%.

Wouldn’t it be nice if the last hike was the end of the madness?

A welcome relief for all of us, as one of the nations most aggressive rate hiking cycles in history hopefully nears an end.

Australia’s Inflation is still at crisis levels.

That said, inflation remains extreme and has only marginally retreated from its peak, services and wages pressures also remain heightened. While I have been advocating an end to rate hikes that will have no further impact on this new kind of inflation, the decision to leave rates steady today appears inconsistence with the Governor’s own comments and previous statements from the Bank?

If the RBA were really prepared to fight inflation to get it down quickly, it would most certainly have hiked rates today. Are we back to the initial inflation recognition period, very late in the game, where the Governor of Australia’s central bank merely does whatever his hero, the Chairman of the Federal Reserve does? The Fed has just made its last rate hike.

Could this be the end of Australia's tightening cycle? If so, it would seem somewhat early. Especially by those same Fed standards.

The Governor is on his way out for disappointing performance in the job. Rates should have been raised slowly immediately the economy began to recover from Covid. Instead, the RBA kept rates at crisis levels when there was no longer a crisis, and appeared to be striving to win some kind of ‘we care’ or popularity contest with business and investors. Especially, property investors which for a period seemed to be the entire country.

Up to 10% of mortgage holders are believed to now be in or at risk of negative equity. After being promised no rate hikes until 2024, budgeting for that, and then actually getting the most aggressive hiking cycle in history? Property prices have fallen up to 20% in some major city suburbs and mortgage holders interest payments have blown out to crisis levels.

Many first home buyers will find they have lost their life savings, were they to sell now.

Unfortunately, Australia risks more of the same terrible mis-management of monetary policy. As yet another RBA insider is being promoted to the role of Governor.

For a decade I have advocated for appointment from outside the bank so the organisation can remain fresh and current.

Instead, it seems we have a situation of ‘out with the old and in with the old’. Again.

Nevertheless, rates on hold is seen here as a necessary response to the fast slowing economy where Retail Sales fell a sharp 0.8% last month, private credit growth is slowing alarmingly and signs of recession are everywhere.

The RBA, as I wrote in 2020, would likely give the Australian people a rollercoaster economy. And this it continues to do.

Wouldn’t it be grand if the last hike was the end of the madness.

Clifford BennettACY Securities Chief Economist

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This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.