This question seems to come around quickly, doesn’t it?
The Board of the Reserve Bank of Australia, RBA, is responsible for formulating monetary policy.
RBA sets a target ‘cash rate’, which is the interest rate that banks pay to borrow funds from other banks in the money market overnight. It influences all other interest rates, including mortgage and deposit rates, and RBA announces this in a media release after its Board meeting, which occurs on the first Tuesday of every month except January.
The RBA will either cut, raise or hold the cash rate after taking into consideration a wide range of factors, including domestic and international economic and financial conditions, along with the outlook for economic growth and inflation in Australia.
So how are things looking at the end of September 2023?
In a snapshot, housing, electricity, and fuel continue to drive inflation.
The price of a new-build is up 4.8 per cent. This is the lowest annual rise since August 2021, probably because building material price increases continue to ease with better supply.
Rent prices rose 7.8 per cent in the 12 months to August as the rental market remains tight.
Electricity prices rose 12.7 per cent and gas up 12.9 per cent in the 12 months to August. Fuel prices rose 13.9 per cent compared to 12 months ago.
Looking at other typical household expenditure, food and non-alcoholic beverages had the lowest annual increase since February 2022, a rise of 4.4 per cent. Dairy products, bread and cereal have risen over 10 per cent in the past 12 months, however fruit and vegetable prices are down 8.3 per cent from 12 months ago likely due to improved growing conditions.
Demand and prices remain high for both domestic and international holidays with travel and accommodation costs up 6.6 per cent over the twelve months.
There’s a new Reserve Bank governor at the helm on Tuesday 3rd October as Michele Bullock fronts her first RBA board.
How will it play out? Will the RBA go higher than 4.10 per cent?