Expect investors to pour further into the housing market and completely shut out first home buyers following the decision of the RBA to adopt the Federal government’s lack of direction economy and hold the base cash rate at 3.60%.
Instead of increasing the base rate to deter investors from digging a deep debt hole that will prove hard to manage once the housing bubble bursts, and it will, as our marketplace is currently confirmed as the most unaffordable in the world, with only 5% of homes in NSW at an attainable level for average first home buyers.
This compares to 30% of homes in 2019-2020 being affordable for average first home buyers with an annual household income of $150,000. By 2024-2025, this had dropped to 12% with the income needed to service a home loan rising to $180,000.
Lack of control of the runaway housing market and the possible ramifications that will follow could be enough alone to place the Albanese Federal government and current RBA board into a position a ridicule for years to come, as it appears they are doing nothing to arrest the situation.
The housing market will run rampant and add to inflation before the next RBA board meeting in February, in addition to Christmas sales such as Black Friday, that increased 4% to $6.8 billion.
And with the living memory of the inflation increase in October from 3.6 to 3.8% the volatile mix of housing, economic growth, real wages and unemployment is a witches brew difficult to tame if either segment is ignored.
If high inflation persists through December and January and the RBA wants to maintain its credibility as an inflation-targeting central bank, it will have no choice but to hike rates when they meet in February.
High inflation is already damaging the current economy, and its impact on every household and business is evident in a low base cash rate economy where the burden is primarily on lower-income households and small businesses.
Whereas a higher interest rate economy would at least spread the burden across more middle- and higher-income earners.
The only possible plus from the RBA decision today is that the pause of RBA monetary policy at least signals the possibility of an upward cycle, and both households and businesses should remove expectations of lower interest rates from their spending plans in 2026.
RBA is choosing to ignore new monthly data figures
The Reserve Bank now has access to monthly all-inclusive CPI data for the first time but indicated the ABS’ is not yet proven for it to be used as an accurate measure for whether rates need to go up.
As part of the RBA board’s decision to hold the cash rate at 3.60%, it indicated the recent inflation spike is, “Due to temporary factors” and that there is uncertainty about how much signal to take from the monthly CPI data given it is a new data series.”
This statement alert was prompted after the November CPI confirmed both headline and underlying inflation are outside the RBA’s 2 to 3% target range.
The RBA Board explained further, “Nevertheless, the data do suggest some signs of a more broadly based pick-up in inflation, part of which may be persistent and will bear close monitoring,” the statement read. “There are uncertainties about the outlook for domestic economic activity and inflation and the extent to which monetary policy remains restrictive,” the RBA Board concluded
Statement issued by the RBA Monetary Policy Board: Monetary Policy Decision
9 December 2025. Number2025-33
At its meeting today, the Board decided to leave the cash rate unchanged at 3.60 per cent.
While inflation has fallen substantially since its peak in 2022, it has picked up more recently. The Board’s judgement is that some of the recent increase in underlying inflation was due to temporary factors and there is uncertainty about how much signal to take from the monthly CPI data given it is a new data series. Nevertheless, the data do suggest some signs of a more broadly based pick-up in inflation, part of which may be persistent and will bear close monitoring.
Economic activity continues to recover. Growth in private demand has strengthened, driven by both consumption and investment. Activity and prices in the housing market are also continuing to pick up. Financial conditions have eased since the beginning of the year, credit is readily available to both households and businesses and the effects of earlier interest rate reductions are yet to flow through fully to demand, prices and wages. On the other hand, money market interest rates and government bond yields have risen more recently.
Various indicators suggest that labour market conditions remain a little tight. The unemployment rate has risen gradually over the past year and employment growth has slowed. However, measures of labour underutilisation remain at low rates, surveyed measures of capacity utilisation are above their long-run average and business surveys and liaison continue to suggest that a significant share of firms are experiencing difficulty sourcing labour. Wages growth, as measured by the Wage Price Index, has eased from its peak but broader measures of wages continue to show strong growth and growth in unit labour costs remains high.
There are uncertainties about the outlook for domestic economic activity and inflation and the extent to which monetary policy remains restrictive. On the domestic side, the pick-up in momentum has been stronger than anticipated, particularly in the private sector. If this continues, it is likely to add to capacity pressures. Uncertainty in the global economy remains significant but so far there has been minimal impact on overall growth and trade in Australia’s major trading partners.
RBA Monetary Policy Board decision
The recent data suggest the risks to inflation have tilted to the upside, but it will take a little longer to assess the persistence of inflationary pressures. Private demand is recovering. Labour market conditions still appear a little tight but further modest easing is expected. The Board therefore judged that it was appropriate to remain cautious, updating its view of the outlook as the data evolve.
The Board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions. In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market. The Board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome.
Today’s policy decision was unanimous.
