The Reserve Bank of Australia (RBA) met yesterday the 6th of April 2021 to discuss the current economic climate and what to do with the cash rate.
From the RBA meeting it came as no surprise that they decided to keep the cash rate at the historically low 10 basis points (0.10%), but what was interesting is how long the RBA thinks it will take before they reach a point where a rise needs to be considered.
The RBA doesn’t expect conditions that constitute a rate rise to be met until 2024.
They outlined a few things that they are looking for before pulling the trigger on a rise, and surprisingly are not concerned to much around the heat of the property market.
Unemployment has come back down to 5.8% which is its pre-covid level, however the RBA want to see that get even tighter which will then in turn put pressure on wage growth.
Inflation is hovering below 2%, which the RBA want to target between 2-3%, and stated that though they saw GDP up 3.1% for the December qtr signaling a return to consumer spending, inflation will remain subdued while wages are stale.
We have seen the 10 year bond yield start to rise, which in turn will put pressure on banks, however with the RBA purchasing 3 year bonds at the target cash rate, it might be a little while before we see mortgage rates back over 2%.
On a positive note, surging house prices has seen people move into a positive wealth position, and their net wealth overall reach $200,000USD per person, making Australia one of the wealthiest countries (per capita).