Following much debate about when the RBA would exit its easing policies, the central bank has held the cash rate at a record-low 0.1 of a percentage point for another month.

Speculation is running wild about interest rates rising before the RBA’s long-time ‘deadline’ of 2024, and the RBA appears to be inching into that debate. Towards the end of last month, RBA assistant governor for economics Luci Ellis reiterated the central bank’s position of “supporting monetary conditions”, noting that the pandemic is not over and that Australia still has a long way to go to achieve an inflation rate of 2-3 per cent.

Commenting on the bank’s latest decision, Harley Dale, chief economist at CreditorWatch, said that is “no surprise to anybody”. Stressing the importance of “not getting ahead of ourselves”, Mr Dale advised against speculation over the future of the economy. “Right now, nobody knows when circumstances will become appropriate for interest rates to rise and that includes the RBA itself,” Mr Dale said.

“The June 2021 RBA Credit Aggregates and the May results for the CreditorWatch monthly Business Risk Review are just two of many examples of how Australia’s recovery lacks the breadth and depth we require. “There are holes in the ‘how good are we doing’ headlines, and that includes a sharemarket that is more vulnerable than seems to be the focus that it deserves,” he added.

After conceding last month that the RBA’s conditions for a rate hike are still far from being met, AMP Capital’s Shane Oliver reiterated there is still a way to go (read article below from late June) to reach wage growth of above 3 per cent and target-zone inflation, particularly with coronavirus still causing periodic problems. “That said, we expect the conditions for a rate hike to be in place by 2023 so anticipate a 2023 rate hike, ahead of the RBA’s own expectations for no rate hike until 2024 at the earliest,” he added.

However, leading banks disagree with the current time frame set out by the central bank, with many confident the conditions to change monetary policy will be met sooner. Last month, both Westpac and Commonwealth bank detailed rate hike predictions, with the latter foreseeing a rate lift as soon as November 2022.

Note: If in doubt, speak to your Financial Advisor/Planner, or call Westmount/Rick Maggi