Strapped households hoping for interest rate easing this year have had their hopes dashed as experts warn that the Reserve Bank of Australia (RBA) may be biased towards rate hikes again as inflation remains stubbornly high. Ta.
No interest rate cuts are expected in 2024, as the inflation rate in the first quarter of 2024 was 3.6%, higher than expected, and there are concerns about the future impact on wage increases and tax cuts. That's a big change from expectations earlier this year of at least two rate cuts. and massive government spending.
MORE: New law: smokers are now banned from their home balconies
Brisbane property market overtakes Melbourne: No end in sight for rising prices
Donors contribute $21 million to purchase cattle station for endangered parrots
![border notification](data:image/svg+xml,%3Csvg xmlns="http://www.w3.org/2000/svg" viewBox="0 0 1280 720"%3E%3C/svg%3E)
Economist Saul Eslake believes the March quarter CPI data has dispelled hopes of a rate cut this year.Photo: Chris Kidd
Economist Saul Eslake of Corinna Economic Advisory, who sits on the advisory committee of Australia's Parliamentary Budget Office, said the March consumer price index data “reinforced the expectations of others that the RBA might cut interest rates this year. My expectations should have been rewarded.”
“The RBA has been slower to start raising rates than its peers, and the rate hikes have been lower than their peers, so it makes sense that they would start cutting rates later than their peers,” he said. “In particular, given that Australian households will receive a tax cut (in terms of the impact on total household cash flows) equivalent to two 25bp interest rate cuts from 1 July (as the RBA will do). Then all the better.”
REA Group's Cameron Kusher doesn't think there will be a rate hike yet, but expects a rate cut to be delayed further.
Cameron Kusher, head of research at REA Group, warned that the RBA could brace for a potential interest rate hike if it thinks inflation is not under control.
“The RBA will re-enter its upside bias in the last few minutes as the CPI numbers have come in better than expected, but we don't think they will move up yet. There is a strong possibility that interest rates will be cut further depending on the situation.
Pete Wargent of Allen Wargent Property Buyers said: “The most likely scenario is that it will be on hold throughout 2024 and the market is leaning in that direction.”
“It will take quite a long time for inflation to return to target. We have picked the low hanging fruit of getting it down to 3.6%, but the final leg could be a tough one,” he said. .
Pete Wargent of Allen Wargent says there's been a bit of wariness from some homebuyers.
He said that homebuyers are now becoming a little more cautious, with some investors experiencing cash flow difficulties and some selling.
“Brisbane and Perth are suffering from inventory shortages and despite the above, we still have a significant level of inquiries,” he said, but the buying frenzy due to expectations for a rate cut is currently postponed to 2025. I expected it to happen.
According to the Finder RBA Cash Rate Survey, all 36 experts and economists expect the RBA to remain at 4.35% in May, with head of consumer research Graham Cooke saying: We are unlikely to do so because we are one of the affected numbers.” Rate cuts are likely to continue at least through December, if not beyond that. ”
Finder's Graham Cooke said all 36 cash rate researchers and economists expected the RBA to remain at 4.35% in May.
Check out the latest PropTrack Home Price Index
Friday's ASX 30-day interbank cash rate futures showed a 3% expectation for interest rates to rise to 4.6% by Tuesday's Reserve Bank board meeting, but markets and experts expect the official cash rate to remain at 4.35%. It is widely expected that this will happen. The location where it has been since November.
According to RBA data, the last time interest rates were this high was more than 12-and-a-half years ago, from December 2011 to April 2012, when they stood at 4.25%, after falling from 4.5% in November 2011. Ta.
Tim Reardon, chief economist at the Housing Industry Association, said continued strong population growth, very low unemployment, rising rental prices and rising housing costs made it unlikely the country would return to its 2% to 3% inflation target. He warned that he would be blocked in the future.
Moody's Analytics' Harry Murphy Crews expects inflation to end 2024 at 3.2% and not return to the top of the RBA's target range until early 2025.
