The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
Borrowers expecting a reduction in interest rates due to sluggish economic growth might have to wait longer, as the Reserve Bank of Australia (RBA) prioritizes inflation management.
Though the economy is experiencing a downturn, RBA Governor Michele Bullock emphasizes that the demand for goods and services still outstrips supply capabilities.
"It's understandable that people think a slower economy should lead to rate cuts, but we need tangible inflation improvement before making such a move," Bullock stated during her speech on Thursday.
This comes in the wake of a modest 0.2% economic growth in the June quarter, with an annual increase holding at 1%, marking the lowest since the 1991 recession outside the pandemic period.
The slowdown was anticipated as a consequence of maintained high-interest rates aimed at dampening demand to curb inflation.
Despite slowing growth, Bullock pointed out that demand remains high partly because post-pandemic resurgence has sustained some strength in the economy.
She also mentioned the ongoing underperformance on the supply side, particularly in productivity growth.
"It's a matter of growth rates versus levels," she explained at the Anika Foundation Fundraising Lunch, indicating that inflation persists due to demand remaining higher than supply capabilities.
This protracted wait for interest rate cuts is challenging for the federal government, which faces scrutiny over its budgetary decisions and their impact on inflation.
Bullock acknowledged that both federal and state governments are wrestling with inflation as it directly affects their regions' residents.
When asked if Treasurer Jim Chalmers was shifting blame to the RBA, Bullock refrained from commenting directly but clarified both were committed to their roles.
The opposition has leveraged the national accounts to criticize the government, with Shadow Treasurer Angus Taylor suggesting a conflict between government spending and RBA's inflation control measures.
In defense, Finance Minister Katy Gallagher highlighted that the government's expenditure was strategically targeted to support the economy without exacerbating inflation;
"Had the government not provided necessary aid during this period, the economic figures would have been worse," Gallagher told ABC TV on Thursday.
Bullock further dedicated significant portions of her speech to the hazards posed by stubborn high inflation.
She cautioned that although inflation expectations are stable, this stability is not guaranteed. A scenario of expected consistent price rises could necessitate further interest rate hikes.
"In that case, we would need to throttle the economy more, leading to higher unemployment and potential recession," she warned.
Prolonged inflation risks pushing more borrowers, particularly those with lower incomes, into mortgage stress and potentially forcing home sales.
"High inflation is why there is so much cost of living discussion - it adversely affects everyone, especially the most vulnerable,” Bullock concluded.
The Australian Prudential Regulation Authority (APRA) has announced a significant policy change aimed at mitigating financial risks associated with high debt-to-income (DTI) loans. Effective from 1 February 2026, APRA will implement a 20% cap on new loans where the borrower's debt exceeds six times their income. This measure applies to both owner-occupied and investor loans, reflecting a proactive approach to maintaining financial stability in the housing market. - read more
According to Canstar's latest Consumer Pulse Report, the cost of housing remains the foremost financial concern for Australians as they head into 2026. Despite three cash rate cuts in the past year, 21% of Australians identify housing expenses, including mortgages and rents, as their primary financial worry. This marks the fourth consecutive year that housing costs have topped the list of financial concerns, with the percentage more than doubling over the past five years. - read more
The Australian personal loan market is undergoing a significant transformation, with digital lenders now accounting for over 40% of new loan originations. This shift is driven by the rapid digitalisation of loan processes, offering borrowers faster approvals and broader eligibility criteria. - read more
Getting a loan approved can be a critical step in achieving your financial goals, whether it's buying a home, starting a business, or consolidating debt. However, the loan approval process can often be complex and challenging, with many Australians facing difficulties in securing the loans they need. - read more
Understanding interest rates is crucial when considering any loan. Interest rates determine how much you'll need to pay back over the life of a loan and can significantly affect the total cost. By gaining a solid grasp of how these rates work, you can make more informed decisions that could save you money in the long run. - read more
Embarking on a journey towards financial stability begins with the mastery of personal budgeting. It's the cornerstone of sound money management, where every dollar is allocated purposefully, paving the way for a future free from the shackles of financial stress. In this all-important first step, individuals learn the fine art of balancing their earnings with their expenditures, a fundamental skill for anyone looking to navigate their finances with confidence. - read more
Need Help Finding a Loan?
Find out now if you qualify and compare
rates, offers and options from multiple lenders - without a credit check!
All finance quotes are provided free (via our secure server) and without obligation. We respect
your
privacy.
Knowledgebase
Debt Consolidation: The process of combining multiple debts into a single loan with a lower interest rate or more favorable terms.
