After months of rising repayments, homeowners have been handed a reprieve with a leading economist predicting further interest rate hikes are now increasingly unlikely.
The Reserve Bank of Australia (RBA) has left the official cash rate unchanged at 4.35 per cent, pausing its tightening cycle for the first time this year.
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The first hold of 2026 follows three consecutive rate hikes and comes despite ongoing concerns about inflation and the impact of higher fuel prices flowing through to the broader economy.
While RBA Governor Michelle Bullock refused to rule out further increases, HSBC chief economist Paul Bloxham said he believes the economy is already weakening enough to make additional rate rises unlikely.
“The Governor’s right to point out that inflation, of course, is still too high and that’s the primary concern, and they could lift rates if they needed to,” Bloxham told Sunrise.
“But we’re already seeing pretty clear signs that the economy is weakening. We’ve seen employment start to fall, the unemployment rate rising. We’ve seen consumption start to ease as well.”
The RBA board said inflation remains above its preferred target range and noted higher fuel costs are contributing to price pressures across goods and services.
However, Bloxham said several key indicators suggest the economy is slowing.
The housing market, which had remained resilient through much of the tightening cycle, is now showing signs of cooling.
Bloxham said those conditions would normally be consistent with a central bank preparing to cut rates rather than increase them.
But with inflation still a problem, he said he expects the RBA to leave rates where they are for an extended period while it continues its fight against inflation.
“They’re going to keep putting some pressure on the economy, we think, by just sitting still with their current setting,” he said.
Bloxham argued governments should focus on measures that improve productivity and boost economic growth.
He criticised the latest federal budget for being more focused on redistributing wealth than expanding the economy, calling for reforms that increase competition, reduce regulatory barriers and improve the efficiency of the tax system.
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