RBA interest rates: Michele Bullock's 2024 blow for struggling Aussies as 'bumpy' ride expected

Michele Bullock has stressed the RBA isn't the sole cause of financial stress in Australia, with Yahoo Finance contributor Stephen Koukoulas pushing the same rhetoric just last week.

There are many rising costs, driven by inflation, that aren't impacted by the "blunt tool" of interest rate rises.

Consider alcohol prices driven by twice-annual indexation, food prices or insurance costs impacted by weather events.

Even loop back to petrol.

"After all, interest rate hikes from the RBA will have approximately zero effect on global oil prices," The Kouk wrote.

You can take a look at the full story here, where the economist called for caution on calls for further interest rate hikes.

Bullock's take? Her priority should remain to bring down inflation.

"That's the best thing I can do for them. I understand the interest rates hurt, but that's the tool I've got and that's the best thing I can do for them," she said.

Petrol prices were mentioned in the statement on monetary policy this afternoon, and they've come up a few times now as Bullock discusses challenges in the Australian economy.

Monetary policy isn't one that often evokes emotion but Bullock gave a little glimpse into the person behind the RBA veil. One who also feels inflation pain.

"It really hurts. I went to fill up my car with petrol the other day and I got an absolute shock when I saw the price of it," she said.

"There's an underlying chunk of stuff here which is just eating into people's spending power."

She said the stickiness of inflation has been "frustrating", but reiterated, in somewhat of a nod to her predecessor's catch phrase of the 'narrow path', that she believed the RBA is on the "right path".

"We're not trying to tip the economy into recession because really the worst thing that could happen for many people is to lose their jobs."

The RBA board did consider increasing interest rates over the last six weeks, but acknowledged they are currently "restrictive" and have been "painful for many people".

She took the time to point out that different Australians were experiencing the cost-of-living crisis in very different ways, and that the board had a responsibility to all of us.

"On the one hand, there's some people who are managing to save despite higher inflation and interest rates. In fact, some of those with mortgages are still making extra payments into offset and redraw accounts on top of their required payments. But on the other hand, we also know that there are households who are really struggling to make ends meet.

"These people don't have a lot of extra savings. They might be working a second job, cutting back on discretionary items or making difficult decisions, such as putting off medical appointments. These people are doing it very tough, and the board and I are very conscious of that."

Despite this, Bullock said the board will not hesitate to "see the job through".

"If we have to move, we will," she said.

RBA Governor Michele Bullock says she believes interest rates are at the "right level" to bring inflation down to desired levels.

The RBA ignored calls to hike rates but Bullock warned Australians to buckle up for a "bumpy" ride.

"We believe that rates are at the right level to achieve this, but there are risks and at this stage the board is not ruling anything in or out," she said.

Bullock said she was well aware many were doing it tough and that was considered at the meeting.

She expressed confidence in the board's approach and warned against being too reactive to the ups and downs. "We think at the moment we're probably OK."

The language used by the RBA board is often picked apart and analysed by economists to determine how it will behave in the void of silence we have before the next decision.

Was there a 'hawkish tone' or something to indicate a tightening bias? Or was the board 'not ruling anything in or out'?

Well today, despite predictions that we'd see language indicating a rate rise next time round due to those March inflation numbers, it was the latter.

"No change from the RBA, no tightening bias or hint they will be monitoring the economy looking for inflation and growth risks... so they're being mere mortals like all of us and tracking the data to see if the inflation grows, unemployment dynamics are consistent with their objectives of inflation between 2 - 3 per cent and full employment," Stephen Koukoulas said.

"No surprises to most sober people. It sort of puts the kibosh on the rate hike crazy cats out there recently. Until 3.29 this afternoon, I am assuming they'll be running away from that hysteria that was driven by a tiny misstep on the March quarter inflation numbers."

It's not just our resident economist making that claim. This is from market analyst Josh Gilbert at eToro.

"The surprise was that we didn’t get the stern hawkish tone that was expected by many. Yes, the RBA’s language is more hawkish than its previous statement, but in no way does it point towards a tightening bias; instead, it is firmly neutral," he said.

"The board highlighted inflation easing, but at a slower rate than they had expected, and therefore are ‘remaining vigilant to upside risks’. That’s seen the RBA revise its inflation forecasts higher while lowering its unemployment projections."

"The process of returning inflation to target is unlikely to be smooth."

That's the warning the board had for Australians when it detailed its decision to hold the cash rate.

The path to an interest rate drop is "highly uncertain", with the RBA admitting inflation was dropping slower than expected.

"The Board expects that it will be some time yet before inflation is sustainably in the target range and will remain vigilant to upside risks,' the board said in a statement.

"The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out."

Some have argued the data shows that inflation isn’t falling fast enough to hit the RBA’s 2-3 per cent target band and that its strategy needs to be revised.

However, the RBA board said the plan is working and has stuck to its projection that inflation will drop before the end of 2025.

So with another hold, here's how mortgage holders have fared since the rate began to lift from 0.1% in May 2022.

Australians should expect at least two rate hikes as the current cash rate of 4.35% just isn't getting to grips with inflation, economist Warren Hogan has warned.

He told the ABC the "toughened up" language from the RBA during their rate hold on Tuesday "suggests that they're moving towards a rate hike" after higher-than-expected inflation. He predicts a rate hike will come in August.

He said two hikes were likely and it could even be three if Australia replicates what other countries have done with similar economies.

As expected, the RBA has held the interest rate at 4.35%.

A Finder survey of 36 experts is unanimous that the Reserve Bank will hold the cash rate today.

If that's not a strong indication of what's going to happen in less than an hour's time, I don't know what is.

But what's less certain is when we will eventually see a cut. Hopes of a drop in the interest rate in the coming months are fading.

"Inflation is still coming down so we still expect a rate cut this year, but March quarter inflation was higher than expected particularly for services inflation and so we have delayed our expectation for the first rate cut to year end," Shane Oliver from AMP.

The Australian Bureau of Statistics has revealed retail sales volumes fell 0.4 per cent in the March quarter 2024 – the fifth time they have fallen in the last six quarters.

Finance expert Stephen Koukoulas called the update "absolutely miserable" and "rotten".

Ben Dorber, ABS Head of Retail Statistics said Aussies were cutting out expensive purchases such as furniture and electronic goods.

Koukoulas warned the RBA needs to consider an interest rate cut sooner rather than later otherwise "the economy is cactus".

"So we've got this situation where we're probably going to be on the cusp of not just a per capita recession, but genuine recession. The Reserve Bank needs to get on the spike and cut interest rates," he said.

"The economy is exceedingly weak. It's being crushed under the weight of oppressive monetary policy.

"The RBA could stuff it up again and I am hoping we get a sober, sensible commentary from the RBA this afternoon, and hopefully the next move is down."

Mortgage holders could save themselves more than $9,000 of financial pain if they're proactive rather than wait for the Reserve Bank of Australia (RBA) to lower interest rates, which could come in November at the earliest.

New data has revealed mortgage holders could avoid paying a little more than $3,500 in repayments and a whopping $4,500 in interest if they shopped around for a new rate.

"If borrowers opt to wait for the Reserve Bank to cut the cash rate and lenders to follow suit, they could be facing thousands of dollars in additional repayments and interest," Steve Mickenbecker, Canstar's finance expert, said.

"However, seizing the opportunity to switch now could result in considerable savings, especially with the first forecasted rate cut in November. By refinancing now borrowers can lock away savings over the next six months or so if the cash rate cut comes in line with expectations of the big four banks in November, and then double dip when rates eventually fall. It’s hard to flaw this approach.”

Despite there being no cash rate increase in 2024, 33 lenders have increased their variable rates and 10 lenders have increased their fixed rates.

Yahoo Finance Contributor Stephen Koukoulas

The number of ANZ mortgage holders who have missed their payments has jumped dramatically in the last year.

People with loans that were 60 to 89 days past their due date went up 63 per cent in the 12 months to March, while the number of homeowners with loans that were more than 90 days past due rose 39 per cent.

ANZ said these increases were driven by home loans, with the RBA increasing the interest rate from 3.6 per cent to 4.35 per cent from March last year to now. The bank's chief executive Shayne Elliott said this number is actually "very, very low" when compared to pre-COVID times, but warned more could be affected by the RBA holding interest rates.

"We would expect the number of people under stress to increase," he said. "Those interest rates will — are — continuing to hurt. So, you'd expect there to continue to be a slowdown and there will be, we will see, more customers get into stress."

It now takes people on average 22 years to save for a house in NSW, revised Finder research has revealed.

When its analysis was released last year, that figure stood at 20 years to get your deposit and other costs together but it's since shot up as house prices continue to soar despite elevated interest rates.

The table shows just how long Aussies across the country are having to wait.

Renowned finance voice and Yahoo Finance contributor Stephen Koukoulas says RBA Governor Michele Bullock needs to get to grips with the narrative surrounding interest rates as millions of struggling Aussies are clueless about what 2024 will look like.

According to The Kouk, Bullock's big "mistake" is her "silence between meetings".

"An occasional speech is important. The void has been filled by headline grabbers covering all sorts of tosh which is dutifully reported. Bullock needs to fix this," he said.

Chances are most Aussie mortgage holders would've never looked at the RBA Rate Indicator. It shows the market expectations on an official cash rate change based on prices in the ASX.

But, it's something finance expert Joel Gibson keeps an eye on and this is what he told Yahoo Finance it means for you ahead of the RBA's decision today.

"The market is predicting only an 8 per cent chance of a hike, despite all the noise in the past few days," Gibson said.

"On Anzac Day, however, it was a 0 per cent chance - so there's been a big turnaround in the sentiment of professional RBA-watchers.

"My money's on no change, but there's no question things are less predictable than a couple of weeks ago."

There have been 13 rate rises since May 2022, when the RBA's cash rate was just 0.1 per cent.

It's now been at 4.35 per cent since November and is nearing one year above 4%. The rate is at its highest since November 2011.

The mood has quickly changed for struggling mortgage holders hanging on by a thread. With fears rate cuts will now come at the end of the year, there's mounting discussion there'll be at least one hike somewhere in between.

Geoffrey Kingston from Macquarie University Business School said the CPI report for the March quarter was ugly and that it may not be cuts on the way, but hikes.

"News from overseas was similarly bad. On the other hand, March retail sales were weak," he said.

"The [Reserve] Bank will probably sit on its hands for several months. However, ongoing high government spending and the July tax cuts may combine to force a rate rise sometime this summer," Kingston said.

Former RBA governor Philip Lowe agrees rates could still go up, while Judo Bank chief economic adviser Warren Hogan says there could be three hikes.

CBA and Westpac predicted there would be a rate cut earlier in the year, but pushed their forecasts back to November after recent CPI data showed annual headline inflation sits at 3.6 per cent.

The RBA wants inflation to sit between 2-3 per cent and sets its monetary policy such that inflation is expected to return to the midpoint of this target. So we're definitely moving in the right direction, inflation-wise, but it's still a bit off until the RBA is likely to do a cut.

The main banks are all now in agreement regarding when and how much a cut Aussies will receive.

CBA - 0.25% pts in November 24

Westpac - 0.25% pts in November 24

NAB - 0.25% pts in November 24

ANZ - 0.25% pts in November 24