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If announced, a cut could help lift consumer sentiment amid global uncertainty, but some experts are warning that the benefits are a ‘double-edged sword’.
How likely is a rate cut?
Economists say two factors are likely to influence the RBA’s decision: easing inflation and growing unemployment.
However, Sally Tindall from financial comparison site Canstar says that while a cut is “highly likely”, it’s important to remember that “nothing is guaranteed until the RBA actually does make that decision at 2.30pm on Tuesday”.
Who benefits from an interest rate cut?
Tindall urged caution because rate cuts can sometimes be a “double-edged sword” as it can lead to an increase in house prices.
Why could an interest rate cut mean higher house prices?
It forecasts that RBA rate cuts in August and November would lead to house prices rising by 6 per cent in 2025 and 4 per cent in 2026.
Where will housing prices be affected?
The CBA also forecasts that an interest rate cut could lead to house price increases of 8 per cent in Brisbane, 7 per cent in Perth and 6 per cent in Adelaide.
Source: SBS News
“What will help cool the situation is increased stock, and I think that still needs further intervention from the government,” she said.
What about people who don’t own a home?
“Rents are rising at four-and-a-half per cent every year, which is a difficult hurdle for many households to clear, and unfortunately it’s still going to be tough times ahead for renters.”
An RBA interest rate cut could make renting less affordable Source: AAP / Lukas Coch
Sycamore from IG Markets says a common knock-on effect of higher house prices is that landlords may be encouraged to put up rent.
“And that’s not really something we need at this point in time.”
