Navigating Uncertain Times: Australia's 10th Consecutive Interest Rate Increase

As the 10th consecutive interest rate increase comes, there is much uncertainty surrounding how many more hikes can be expected, when we can expect them and what it will mean for the Australian economy moving forward.

While global inflation remains very high, the monthly Consumer Price Index (CPI) indicator suggests that inflation has peaked in Australia. And although the Reserve Bank forecasts inflation to be back to their targeted 3 per cent by mid-2025, the rapid rate increases across the world will have an unpredictable impact on the Australian economy.

This uncertain economic environment is of course not ideal for investors. And with a range of scenarios possible, the RBA have stated that they will do whatever is necessary to return inflation to their target. Because despite these rate hikes already having an adverse effect on many households across Australia, even higher interest rates and unemployment levels would occur should the necessary measures not be taken now.

But while the economy may not look to be in the best shape, as always, it’s important to adopt a long-term mindset and understand that these cycles are natural for any economy. And although some areas of the property market are experiencing the impact of rising interest rates, other areas are enjoying considerable growth.

Despite many people generalising about “the property market”, it’s important to note that there are many submarkets around Australia. Each submarket is segmented by factors such as geography, price point and the property type.

And while the media love to create fear-based headlines only looking at the median price of an entire city, savvy investors are ignoring the noise and focusing on the submarkets. Because although the city of Melbourne saw a decrease of -8.1% in the median property price in the last 12 months, areas such as Keilor East (+20.2%), Rosebud (+18.7%) and Narre Warren South (+18.0%) still experienced impressive growth.

Since further tightening monetary policy is expected, we encourage Australians to monitor their spending habits and make sensible financial choices. And although inflation is expected to decline in the coming months and years, there could still be a lot of uncertainty in the markets moving forward.

If you need some guidance managing your spending, we recommend listening to our podcast episode ‘Being a tightarse in tough times’ to get some great money management tips. And if you’d like to know what submarkets we’re looking at for potential capital growth opportunities in the coming months and years, book a free call with us here.

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