RBA hands down March rate decision

The RBA’s decision comes as little surprise amid ongoing tensions in the Middle East and concern that inflation has been more persistent than expected.

According to REA Group senior economist Eleanor Creagh, although inflation has eased from its peak, underlying price pressures remain above the RBA’s 2–3 per cent target.

She said that January data showed persistent trimmed-mean inflation and sticky housing and services costs, prompting the board to support a modest further policy tightening as unemployment stays low and economic activity remains resilient.

“Recent national accounts data showed the economy expanding by 2.6 per cent over the year to December, a pace that remains above the RBA’s estimate of sustainable growth,” Creagh said.

“While household spending growth has softened in recent months, it continues to expand overall, and the labour market remains resilient. In that environment, the RBA will be wary of declaring the inflation fight over too soon.”

PRD chief economist Dr Diaswati Mardiasmo said the RBA is taking a preventive approach rather than a reactive one, choosing not to wait for the March quarterly inflation reading.

“This is to try and protect the Australian economy from a higher inflation rate, which can happen due to the potential price increase in fuel and other goods and services,” Mardiasmo told REB.

However, she said that raising the cash rate to discourage spending and help control inflation could lead to reduced hours or layoffs, and to higher unemployment.

She added that in the housing market, today’s decision could deter people from buying, pushing agents to be “more clever” with their selling strategies and manage vendors’ expectations further.

“For example, by emphasising the uniqueness of the house or other special features.“

“You also need to talk to your clients about price expectations and ensuring that it's in line with the current average vendor discount in the area, so that pricing is comparable and sold quicker; and the seller does not have to do further discounts.”

Additionally, she said that the rate hike will limit the boost in borrowing capacity from the 2025 cuts, with higher mortgage rates adding to affordability pressures and slowing price growth.

“For both home owners and investors, it will impact monthly mortgage repayment, so revising the bank loan is definitely the advice.“

“Refinancing is an option; however, do not rush, as there might be more cash rate increases in 2026. If you refinance, ensure you can lock in your rate,” Mardiasmo concluded.