Key Points
- Australia's central bank has left the cash rate target unchanged at 3.6 per cent.
- This was flagged as the bank's most challenging rates decision since May 2022.
- The move will be welcome relief for Australians struggling with the soaring cost of living.
The Reserve Bank of Australia (RBA) has paused interest rates, keeping the cash rate at its current 3.6 per cent.
The decision will mean some relief for mortgage holders who have been feeling the pain of 10 consecutive rate hikes made in previous months.
RBA Governor Philip Lowe said in a statement on Tuesday the central bank's board decided to hold interest rates steady to provide "additional time to assess the impact of the increase in interest rates to date and the economic outlook".
But he said more rate hikes may still be needed in the coming months.
"The Board expects that some further tightening of monetary policy may well be needed to ensure that inflation returns to target," he said. The RBA's annual inflation target is 2-3 per cent.
Mr Lowe also cited recent consumer price index data, which he said suggested inflation had peaked in Australia.
"There is further evidence that the combination of higher interest rates, cost-of-living pressures and a decline in housing prices is leading to a substantial slowing in household spending," he said.
Treasurer Jim Chalmers said while today's decision would come as a relief for a lot of Australians, the government understood people would continue to struggle.
"That's why the costs of living are the primary focus of our economic plan and the upcoming budget," he said.
Deloitte Access Economics partner Stephen Smith said the decision to pause will be welcomed not just by millions of mortgage holders but businesses of all sizes which had amassed large debts during the pandemic.
“The effect of 10 rate rises is still working its way through the economy and there are still hundreds of thousands of pandemic-era mortgages fixed at low rates that will revert to variable over the coming year,” he added.
Economist Shane Oliver said it was a "sensible" decision.
Economists and some major banks had been divided ahead of the decision on where the central bank would go: while some predicted a rate pause, others had forecast rates on Tuesday would be hiked to 3.85 per cent.
Financial comparison site Canstar said while borrowers will welcome the pause, many have been reeling from the cumulative 3.5 per cent increase to the cash rate in the past 10 months.
That has added around $1,051 to monthly home loan repayments on a $500,000 loan over 30 years.
