This week brought major developments on the economic front, with the RBA deciding to hold interest rates, the release of new inflation data, discussions about when interest rates will drop and how these shifts could impact property prices.
Interest Rates on hold at 4.35%
At the September 2024 meeting the RBA kept interest rates on hold at 4.35%.
While global central banks, including the Fed, Bank of England, and European Central Bank, are easing rates, the RBA emphasises that they won't follow suit.
Governor Bullock stated that Australian inflation remains high, and the RBA has kept rates lower than those of other banks to support the job market.
With the cash rate at 4.35%, the RBA is not in a position to cut rates as quickly or as aggressively as its overseas counterparts.
Inflation falls within the target range of 2-3%
Headline consumer price inflation fell to 2.7% in August, the slowest increase since August 2021. This is down from 3.5% in July.
The RBA closely monitors the underlying inflation measure, which excludes more volatile price movements. This measure, known as trimmed inflation, decreased to 3.4% in August, down from July’s 3.8%.
When will interest rates drop?
The big four banks agree that the cash rate will likely drop from its current peak of 4.35%, but they differ on timing:
Bank | First cut | End of 2025 |
ANZ | Feb 2025 | 3.60% |
CommBank | Dec 2024 | 3.10% |
NAB | May 2025 | 3.60% |
Westpac | Feb 2025 | 3.10% |
Source: Canstar
What will happen to property prices?
Ray White Economics analysed historical data on property values following RBA cash rate cuts. The study found that these cuts have different impacts across cities.
On average, property values in Australia would rise by about 0.6% in the first month, adding nearly $5,000 to average property prices.
Capital City | % Increase | $ Increase |
Melbourne | 1% | $8,000 |
Sydney | 1.4% | $15,300 |
Canberra | 0.5% | $4,000 |
Brisbane | 0.4% | $3,400 |
Adelaide | 0.3% | $2,300 |
Perth | Unchanged | Unchanged |
Additionally, Canstar research shows that a single rate cut could provide monthly repayment relief of $92 for a $600,000 loan and up to $153 for a $1 million loan.
Five cumulative cuts could lower repayments by $441 for a $600,000 loan and $736 for a $1 million loan.
Source: realestate.com.au
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