Borrowers have been granted another month of interest rate relief, with the Reserve Bank leaving the official cash rate untouched at 4.1 per cent.
The second consecutive month on hold follows four percentage points of increases that have heaped pressure on borrowers.
Like many other central banks around the world, the RBA has been trying to unseat high inflation with a series of interest rate hikes.
Consumer prices are still growing but more slowly, with inflation pulling back to six per cent annual growth through to June, from seven per cent in March.
Despite passing its peak, inflation remains well above the RBA’s two-to-three per cent target range.
RBA governor Philip Lowe said the most recent set of data was consistent with inflation returning to this band “with output and employment continuing to grow”.
However, further tightening remains on the cards.
“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable time frame, but that will depend upon the data and the evolving assessment of risks,” Dr Lowe said in a statement on Tuesday.
For mortgage holders, the interest rate rises have been pushing up their monthly repayments.
RateCity analysis has the average borrower with a $500,000 mortgage stumping up well over $1100 extra towards their loan, compared with what they were paying before interest rates started going up.
Treasurer Jim Chalmers said the decision offered a welcome reprieve for Australian families.
“Australians are still under the pump, even as inflation moderates and even after this decision today,” Dr Chalmers said.
The past few interest rate decisions have been close as the RBA inches towards the end of its tightening cycle, with economists once again divided ahead of the August call.
The convincing slowdown in inflation and subdued retail numbers bolstered the case for another pause, whereas strength in the jobs market and sticky services price pressures were frequently cited by those tipping a hike.
Oxford Economics Australia head of macroeconomic forecasting Sean Langcake said it was increasingly likely the RBA had reached the top of its rate hiking cycle.
“With economic momentum waning, it seems unlikely the RBA will be presented with more compelling arguments to raise rates than they would have heard at today’s meeting,” he said.
The economist picked up a slight change in the governor’s language around inflation returning to the target range by “late” rather than “mid” 2025.
“This may have provided a justification for a tightening in policy to provide further insurance against rising inflation expectations,” Mr Langcake said.
“But ultimately, the RBA seem comfortable letting inflation run above their target for a little longer.”
By Poppy Johnston in Canberra
