RBA Rate Hike Still Possible in August, Economists Warn

Australian interest rate hike predictions are shifting rapidly after fresh consumer price data showed inflation cooling faster than anticipated, according to the Australian Bureau of Statistics (ABS). Official figures released yesterday show trimmed mean inflation rose to 3.6 percent in the June quarter from 3.5 percent in March while undershooting both market expectations and the Reserve Bank of Australia’s forecast of 3.8 percent.

Markets Slash Rate Hike Odds Despite Expert Warnings

Money markets slashed the probability of an interest rate increase at the next central bank meeting to just 4 percent following the ABS data release. Major financial institutions including AMP and Westpac quickly reversed their earlier forecasts for an August rate hike. The Reserve Bank of Australia opted to hold the official cash rate steady at 4.35 percent at its July board meeting following three 25 basis point increases earlier in the year.

Yet real estate valuation and advisory firm Herron Todd White warned mortgage holders against celebrating too soon. According to Herron Todd White Chief Economist Cameron Kusher, lingering price pressures mean the RBA could still decide to lift the official cash rate when the board meets on August 11. “With inflationary pressures persisting, we certainly shouldn’t count out the potential for a further increase in the cash rate over coming months, possibly as early as next meeting,” Kusher said in a monthly property report.

Stubborn Price Pressures Keep Living Costs High

Underlying and headline inflation figures remain uncomfortably above the central bank’s target band of 2.0 to 3.0 percent. Kusher noted that headline inflation sat at 4.0 percent over the year to May, while the underlying measure remains at elevated levels not seen since late 2024. Working families continue absorbing the impact of these persistent costs through rising household grocery bills, fuel prices, and insurance premiums.

Data shows that essential goods and services exhibit stickier price growth than discretionary items. This dynamic offsets relief found in other consumer categories and maintains intense pressure on household budgets across the country.

Housing Market Slows as Borrowers Face Mounting Pressure

Home loan borrowers are navigating shrinking disposable incomes and a rapidly cooling national housing market following a relentless series of rate hikes. National home value growth slowed sharply over the past three months, with prices dropping 0.7 percent as buyer confidence wanes under high borrowing costs, according to Kusher.

Any additional move by the RBA board on August 11 would push average variable rates above 6.5 percent, adding hundreds of dollars in monthly repayments for typical homeowners.

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