Bullock no April Fool: RBA holds interest rates despite easing inflation

The Reserve Bank of Australia (RBA) has announced the cash rate will remain at 4.10% for now in disappointing news for home owners hoping for a second cut.

Although headline inflation is within the RBA’s 2-3% target range and core inflation is also tracking downwards, REA Group senior economist Eleanor Creagh said the bank's decision was not a surprise.

"The decision reflects the RBA’s cautious and data-dependent approach, opting to pause as it monitors inflation and labour market trends before any further policy moves," she said.

House prices hit record high

The PropTrack Home Price Index for March showed national home prices rose by 0.27% in the month, pushing values to a record high.

It is the second consecutive record high after last month's 0.40% rise, with the 0.25% rate cut on 18 February playing a key role. "Climbing house prices in March follow a clear shift in market momentum triggered by the Reserve Bank's February rate cut," she said. "The rate cut boosted borrowing capacities and buyer confidence, helping to reignite demand and reverse the small price declines seen in the months prior. "Market sentiment has improved and buyers who had delayed purchasing decisions due to the sustained higher interest-rate environment are likely re-entering the market."

Ms Creagh said she expected house prices to keep lifting in the near future, but noted the rate of growth was likely to be more modest.

Homes in Sydney saw median prices rise slightly in March – up 0.47% to $1,104,000, while in Adelaide, Brisbane and Perth median prices also saw small boosts to come in at $796,000, $876,000 and $770,000 respectively. Melbourne has continued to struggle to regain its pre-COVID ranking of Australia’s second most expensive city, with growth down 2.26% in the past year despite a 0.2% jump in March, putting its median at $778,000.

Ms Creagh said strong population growth and other structural factors beyond interest rates were also helping house prices grow, but warned stretched affordability remained the nation's key challenge.

"With affordability still a major constraint, the impact of further rate cuts will be somewhat tempered."
Bad news for Labor

Today’s decision from the RBA will be unwelcome news for the Labor government ahead of the federal election on 3 May. The RBA will make its next decision on the cash rate on 20 May, meaning the Albanese government is out of chances to ride a last-minute, rate-cut positivity wave ahead of punters going to the polls.

With prospects for a year characterised by rate cuts on hold, the Labor government is pushing back and doubling down on its housing-policy promises in a bid to win over voters.

Treasurer Jim Chalmers presented the 2025 federal budget last week, confirming the extension of the Help to Buy scheme to higher earners and to cover more expensive homes.

The government also pledged $54 million for the prefabricated and modular housing industry in a bid to boost home building and help meet the government’s five-year target of 1.2 million new homes.