With lockdowns still in place in Australia’s most populous cities, the RBA has decided to hold the official cash rate at a record low of 0.1 of a percentage point for the 10th consecutive month.

As a result of Sydney’s longest lockdown on record and Victoria’s considerable lift in COVID cases, the RBA’s stated conditions for a rate hike are far from being met.

According to chief economist at CreditorWatch Harley Dale, it’s now clear that the RBA will stick to its intention to retain strong support for households and businesses. 

“Predictably, there is no plan to increase the official cash rate until 2024 and policies are being maintained to assist in keeping downward pressure on borrowing costs,” Mr Dale said.

“This environment will be very beneficial for businesses and households as they look towards the hopeful easing of lockdown restrictions in late October/early November.

“The highly stimulatory monetary policy climate will also be crucial in moving through the inevitable bumpiness and uncertainty of a post-lockdown economy.”

However, what could possibly alter the RBA’s course of action is the threat of rising inflation.

Commenting on Tuesday’s decision, Griffith University’s Tony Makin opined that if inflation numbers continue to exceed expectations, the RBA could be forced to raise official rates earlier than planned.

“Given the COVID lockdowns here are having a bigger macroeconomic impact here than abroad, the RBA may, however, be slower to act,” Mr Makin said.

Similarly, Monash University’s Mark Crosby said “rising inflation will likely see them [rates] move sooner than markets currently anticipate”.

Another key change since the RBA’s last meeting has been a clear policy move towards the reintroduction of lending restrictions for residential property, which the RBA plays an integral role in.

Last month, Treasurer Josh Frydenberg strongly indicated that a crackdown on high-debt home loans was imminent following discussions with the Council of Financial Regulators, including the RBA and the Australian Prudential Regulation Authority (APRA).

APRA confirmed in a statement that it plans to release “an information paper on its framework for implementing macroprudential policy” in the coming months and that it would continue to consult with the Council of Financial Regulators on the potential implementation of any measures.

Responding to these developments, Mr Dale said the lending dynamic will be a key area to watch in approaching months.

“The RBA has been noting upward pressure on property prices and housing affordability for a considerable time and will now be upping the ante,” Mr Dale said on Tuesday.

He opined that for a number of reasons, the RBA clearly faces a challenging few months.

“Due to the combination of easing lockdown restrictions and tighter lending conditions, the RBA faces a different dynamic in coming months than has been seen over 2021 to date,” Mr Dale concluded.