AUSTRALIA’S central bank has slowed the pace of rate hikes, lifting the official cash rate by twently-five basis points.<\/p>\n
The 0.25 percentage point lift is the sixth rate hike in a row and brings the cash rate to 2.6 per cent.<\/p>\n
The Reserve Bank of Australia governor Philip Lowe said the\u00a0cash rate has been increased substantially in a short period of time.<\/p>\n
“Reflecting this, the Board decided to increase the cash rate by 25 basis points this month as it assesses the outlook for inflation and economic growth in Australia,” he said.<\/p>\n
The slower pace of monetary policy follows four consecutive 50 basis point rate hikes, and suggests the Reserve bank of Australia is getting closer to its “neutral” setting.<\/p>\n
This is a level where interest rates neither have a stimulatory nor contractionary effect on the economy.<\/p>\n
For mortgage holders, the successive rate rises will add hundreds of dollars to monthly loan repayments compared to six months ago when interest rates were still at record lows.<\/p>\n
A 50 basis point lift was broadly expected, although some economists were hoping to see a smaller rate rise in fear of heavy-handed tightening causing a recession.<\/p>\n
AMP Capital’s Shane Oliver said aggressive rate hiking risked throwing the economy into an avoidable recession.<\/p>\n
He told AAP that Australia had much higher levels of debt compared to incomes than in the mid-nineties, meaning households are much more sensitive to rate hikes.<\/p>\n
PropTrack senior economist Eleanor Creagh said rapid rate rises have taken a toll on the property market, with national prices now sitting 3.35 per cent below their March peak.<\/p>\n
“As borrowing capacities are constrained and buyer’s budgets shrink, the most expensive markets of Sydney and Melbourne have led the price declines,” Ms Creagh said.<\/p>\n
Elsewhere, the impacts of rapid rate rises are harder to spot, with spending yet to slow down, business conditions still strong and the unemployment rate remaining at a 48-year low.<\/p>\n