RBA interest rates: Live updates from the Reserve Bank of Australia’s September board meeting

It’s not my business.

That was how Michele Bullock reacted to what the Federal Government would do with reforms to the RBA now that the Greens have called for an immediate rate cut to support legislation to make the changes.

“I should remind people that even though the focus here is on interst rates, this isn;t the only thing the Reserve Bank does,” she said.

“The Reserve Bank operates banking for the Government - so welfare payments, all those sorts of things go through the Reserve Bank.

“We operate the critical payments system in the country, we operate the wholesale cash distribution system. We have a massive IT operation.

“All of these things are really important functions of the bank and at the moment I’m the sole accountable authority for those. I think that it would be good for us to get some structure ... and I think we can, even if don’t end up with this new dual board structure.”

Michele Bullock says the possibility of a rate hike was not on the table at this week’s meeting. Talk was centred on what has changed since August.

Speaking about the comments from former treasurer Wayne Swan that the RBA board was “punching itself in the face”, Ms Bullock said (as expected) she’d “stay out of the polictics of it”.

“My only comment would be that what we are doing is what we think is best to maintain this narrow path of bringing inflation back down because it’s still too high,” she said.

“According to our current forecast, it’s not really forecast to come back sustainably into the band until 2026. So that’s our focus ... and I;d have to say at the moment we still think we’re on that path where we’re managing to do that without resulting in a large increase in the unemployment rate.”

Governor Michele Bullock says the data since August has not “materially” changed its outlook.

Based on what it knows, “rates will remain on hold for the time being”.

But with inflation above target, it remains “sticky”.

“Progress in getting underlying inflation down has slowed and it’s likely to have remained slow in the September quarter,” she said.

Ms Bullock said last week’s jobs data showed solid growth and the rate of lay-offs remains very low. Foward indicators have eased some such as job vacanies remain elevated.

The RBA’s decision to yet again leave official rates at 4.35 per cent has left homeowners in limbo, says Deloitte Access Economics partner Stephen Smith.

And expect it to remain that way for some time, he warns.

“There is no doubt the economy is on life support: growth is at 30-year-lows while household consumption has fallen to its weakest growth rate since the September quarter 2021 lockdowns,” Mr Smith said.

“However, high government spending and migration are injecting demand into the economy, meaning the RBA’s hands are tied – the labour market is still too robust to permit them to follow the US Federal Reserve and deliver a rate cut at this time.”

But he points to last week’s data showing migration has fallen from its peak - and will continue to decline - which should ease the pressure in some quarters.

“The fact remains that inflation is on its way down, albeit in an uneven way, with much of the inflationary pressures in the economy occurring on the supply side,” he said.

“We believe this, combined with a slowing economy, will lead to a rate cut early next year.”

RBA governor Michele Bullock will front her usual post-board meeting press conference in about half an hour.

Given the political barbs of the past few weeks, expect some pretty direct questions about what she thinks of Chalmers, the Green, Wayne Swan and everything in between.

But also expect her to play a pretty straight bat and focus on the data.

Despite another hold on official rates, Compare the Market’s economic director David Koch said savvy refinancers could create their own rate cut.

Research by the comparison site has revealed 18 per cent of Aussies don’t know their interest rate, while 45 per cent had been with the same lender for more than five years.

That could be costing you beccause there’s a 1.2 per cent difference in some of the lowest advertised rates. An owner-occupier with a $750,000 loan could save $595 a month by switching from a rate of 7.24 per cent to 6.04 per cent.

While the deals may be enticing, Mr Koch warned borrowers who lock in a rate now could find themselves worse off if the RBA decides to reduce the cash rate later in the year.

“While these fixed rates south of 6 per cent may seem tempting, if you can afford to hedge your bets, it may be worth waiting for a RBA cash rate cut,” Mr Koch said.

“Fixed home loans are great for shielding you from rate rises, but they will block you from taking advantage of a rate cut.

“Banks won’t reduce their fixed rates unless they think it’s a safe bet for them. The reality is rates could be a lot lower in four years’ time.

“History tells us it’s usually better to remain a bit flexible and consider staying on a variable rate when we’re at the peak of the cycle and rates are widely tipped to go down.

“Even though there wasn’t a cash rate cut today, seeing these fixed rates drop is a really good sign and an indicator one could be coming soon”.

The RBA had expected household consumption growth to pick up in the second half of the year “as the headwinds to income growth recede”.

But it says this is slower than expected, “resulting in continued subdued output growth and a sharper deterioration in the labour market”.

“More broadly, there are uncertainties regarding the lags in the effects of monetary policy and how firms’ pricing decisions and wages will respond to the slower growth in the economy at a time of excess demand, and while conditions in the labour market remain tight,” it said.

The RBA said its forecasts published in August were for underlying inflation to return to the target range late in 2025 and approach the midpoint in 2026.

“This reflected a judgement that the economy’s capacity to meet demand was somewhat weaker than previously thought, evidenced by the persistence of inflation and ongoing strength in the labour market,” it said.

“Since then, GDP data for the June quarter have confirmed that growth has been weak. Earlier declines in real disposable incomes and the ongoing effect of restrictive financial conditions continue to weigh on consumption, particularly discretionary consumption.

“However, growth in aggregate consumer demand, which includes spending by temporary residents such as students and tourists, remained more resilient.”

The board said wage pressures have eased somewhat “but labour productivity is still only at 2016 levels, despite the pick-up over the past year”.

The RBA has dusted off last month’s statement and just changed the date.

It says while “inflation has fallen substantially since the peak in 2022” as higher interest rates work to curb spending, it “is still some way above the midpoint of the 2–3 per cent target range”.

No surprise there.

“Headline inflation is expected to fall further temporarily, as a result of Federal and State cost-of-living relief,” it said in a statement released just minutes ago.

“However, our current forecasts do not see inflation returning sustainably to target until 2026. In year-ended terms, underlying inflation has been above the midpoint of the target for 11 consecutive quarters and has fallen very little over the past year.”

If you were hoping for interest rate relief, you’ve come to the wrong place.

For yet another meeting, it’s a pause.