RBA interest rates: Michele Bullock has given a clear signal that share markets are a bit too bullish

Michele Bullock has warned that the Reserve Bank won’t step in to rescue share markets if bullish investors come unstuck. The RBA governor’s comments came after cutting interest rates on Tuesday for the third time this year, which helped the ASX200 briefly touch a fresh record high of 8891 points. That represents a whopping 21 per cent gain since the April turmoil caused by US President Donald Trump’s trade tax hikes. Ms Bullock has made it clear that it won’t be the RBA’s job to jump in and prop up traders in the event the market turns south — unless there are wider financial stability worries. “(We’re) not going to come in just for the sake of protecting asset prices,” Ms Bullock said on Tuesday. “We don’t aim at asset prices. We are focused on inflation and employment.” That means no RBA bailout if “financial markets have a little bit of a meltdown and share markets decline a bit”. Instead, the central bank would only move to ease the purse strings — pumping cash and credit into the system — when there was a genuine risk to financial stability. It won’t be the first time her board has drawn a line in the sand on the issue. There were calls for a blockbuster 50 basis-point rate cut during a brief financial market panic in August last year triggered by concerns the US was headed for recession. The RBA kept rates steady and markets have since bounced back strongly. Ms Bullock pointed to the Global Financial Crisis as an example of when the RBA would need to act. That crisis led to lending between banks drying up and caused a major economic slowdown. “You’d have to say the share markets seem pretty sanguine about everything at the moment, considering everything that’s going on,” she warned. “They do seem pretty sanguine to the risks. “So there is a risk that there may be some volatility in financial markets, particularly (with) what’s going on in the US, if things go a bit pear-shaped over there.” The RBA is also keeping an eye on house prices although will not seek to intervene in the market. It came as the average mortgage size for new homeowners neared $680,000, up 7.5 per cent since mid-2024. Western Australia’s average hit a record high of $620,000, according to Canstar. “The RBA’s rate cuts are helping push new loan sizes to eye-watering levels,” data insights director Sally Tindall said. “When the cost of borrowing falls, some buyers use it to bid higher at auction, particularly in sought-after property hot spots. “This is exactly what we’re seeing play out.”

RBA interest rates: Michele Bullock has given a clear signal that share markets are a bit too bullish

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