John Rolfe: RBA gives Aussies a well-deserved breather

The sorely needed reprieve for those with a home loan has finally arrived – and it could be the start of months of rate relief to come, writes John Rolfe.

• Latest: RBA halts rate rises
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The blood pressure of millions of Australians with a home loan has been lowered slightly, thanks to the Reserve Bank of Australia’s decision to leave rates where they are following ten increases in a row.

Some people who rely on interest income to pay their bills will be disappointed. However popular savings products are now offering a return of as much as 5 per cent.

A year ago the average was 0.25 per cent. So things aren’t all bad.

For those with a home loan, this reprieve was sorely needed. They are big contributors to Australia’s economic fortunes, which are deteriorating.

While the jobs market is still strong, more and more businesses are doing it tough and retail spending is falling faster than it did in the GFC.

The RBA has decided to hold interest rates steady as retail spending continues to dip. Picture: Gaye Gerard

The speed of decline would be even greater were it not for higher prices in shops, which makes the numbers look better than they really are.

Coming into this meeting of the RBA board it was clear that inflation is easing.

Reserve Bank of Australia Governor Philip Lowe. Picture: Mick Tsikas

The latest monthly index from the Australian Bureau of Statistics showed a drop to 6.8 per cent in February, from 7.4 per cent in January and 8.4 per cent in December.

Yes, that’s still higher than the RBA’s target range of 2-3 per cent.

But only about half of the full effect of rate increases having been passed through to mortgage repayments, according to St George Bank economists.

So the RBA’s inaction is well justified.

I suspect there will be no more increases to the cash rate in the foreseeable future.

If the economy weakens substantially from here and inflation continues to moderate, we could see cuts before Christmas.

Originally published as John Rolfe: RBA gives Aussies a well-deserved breather