The RBA had their first interest rate meeting for 2022, Tuesday the 1st of February 2022 for decide on their cash rate policy to start the year. The RBA board decided to keep the cash rate on hold at historical low of 0.10 points. The board also commented that they will cease further bond purchasing and the final transaction to occur on the 10th of February.

RBA on the Australian Economy

The board viewed the Australian economy through the lends of the Omicron outbreak and the recent impacts on the economy. Noting that the latest outbreak has not derailed the economic recovery, due to less restrictive state based lockdowns.

The board expects the economy to remain resilient and spending to pick up (note the December retails sales data was weaker than expected). The RBA forecasts that GDP growth of 4.25% for 2022 and in line with the 2% system growth in 2023.

The RBA is happy with the overall strength of the balance sheets of Australian business and households and that should translates into future investment.

There has been a decline in unemployment, now sitting at 4.2% in December, but hours worked in January were weak (due to the recent outbreaks).

Growth in Housing Market

Conditions across the housing markets remain strong, through the rate of increase in housing prices has starting to ease. The RBA seems to be content that the white hot growth in the real estate prices of 2021 – for now seem to be behind them.

This would be down to a number of factors, there has been a massive reduction in state and federal financial support from just 12 months ago. With most of those initial support programs now wrapping up or ceased.

APRA has been leaning on the lenders, to bring in a DTI metric – to limit the factor of borrowings in relation to the applicants income. We anticipate that this will become a major lender policy change in 2022.

Fixed rate interest loans to customers has significantly increased in the last 6 months. Since the TPP facility has ceased by the RBA, the cost of funding has increased for Australian banks. In turn, they have increased their owner occupies and investment fixed loans – with some tenures increased by 100+ points.

Increase in stock available, in key real estate markets. This is allowing a more even market between buyer and vendor.

RBA Interest Rate Meeting February 2021 and inflation

Inflation has picked up above RBA expectations, but remains lower than other countries. Headline CPI inflation is 3.5%, due to higher petrol prices, supplies and supply chain issues.

Underlying inflation is 2.6% and the central forecast is this will increase to 3.25% before declining to 2.75% in 2023.

The RBA February board meeting made the decision to keep the cash rate to 10 points, giving the market certainty that in the short term rates will remain on hold until system inflation is evident. They have also pointed to overseas markets, noting a weaker AUD dollar is favourable. If there is sharp movements in overseas central banks position, this might cause a policy review by the RBA.

If you would like to read more from the RBA decision, click here.

Jeremy Harper is the director of hfinance. hfinance is a mortgage brokering business, to speak with a Sydney Mortgage Broker, Gold Coast Mortgage Broker or an Australian expat mortgage broker. Contact by calling us on 1300 928 227 or email [email protected]