The Reserve Bank firmly backed itself into a corner of its own making yesterday, facing external pressure to cut rates.
One commentator noted (and I agree) that yesterday’s decision effectively undid the completely unnecessary rate hike of November 2023, which raised the cash rate from 4.10% to 4.35%.
At that time, the economy was already struggling, and the increase only added pain with zero benefit.
How does making you hand over more money to a bank reduce spending pressure? (And this isn’t just me saying it—it’s a point raised by commentators.) Especially when we’re dealing with:
- A broken insurance market – where skyrocketing house insurance premiums are forcing some people to go uninsured just to afford groceries.
- A broken electricity market – where, despite promises of $275 cheaper bills, costs have risen by $1,000, artificially propped up by $300 government handouts.
When a government is elected on the promise of lowering the cost of living, voters are entitled to hold them accountable.
The Reserve Bank specifically called out the government’s manipulation of inflation figures through these $300 rebates, making it clear that they don’t buy into the “smoke and mirrors” distorting the already broken electricity market.
So, in a rare move, the Reserve Bank essentially said (paraphrasing here):
“Here’s a rate cut to undo the one we never should have made… now let’s all take a breather while we assess the impact of:
- The election and its effect on government spending (and rebates)
- US tariffs
- Employment trends
But don’t expect more rate cuts anytime soon.”
In fact, the governor’s exact words were:
“This is not the start of more rate relief.”
So, enjoy the 0.25% cut from yesterday, take a step back, and, like me, wait to see what unfolds.
For new borrowers, there is a silver lining—this cut will increase your borrowing power.
As I often say: Stay tuned.
In the meantime, if you’d like advice tailored to your own personal circumstances, please call or email me anytime… It’s what I’m here for.
Ask Alan – Mortgage Broker Brisbane, and Australia wide