Knowing when interest rates are in for a cut is like placing a bet on the Melbourne Cup, most pundits go with their gut and the latest form. Yet form, just like economic factors, can be fickle. I’ve almost lost count of the number of varying predictions around rates this year, seemingly almost monthly we’re being fed something new to mull over.
We saw data released this week reflecting the shrinking of the Australian economy, on a per capita basis, for a sixth consecutive quarter. While our economy grew by just 0.2 per cent last quarter, taking the 2023-24 financial year rate to 1.5 per cent, it’s the slowest growth we’ve seen outside of the COVID-19 period since the early ‘90s.
We recently spoke with Ray White Chief Economist Nerida Conisbee on the subject of rates and her hot tip is a drop in rates PRIOR to Christmas, with an additional four cuts in 2025. If this is the case, will the banks pass on these cuts? Nerida believes they’ll have to, in a bid to build market share, despite history showing a reluctance to do so.
RBA governor Michele Bullock however has doubled down on her warning that Aussies should not expect a rate cut anytime soon, once again pointing to inflation as a key trigger for any adjustments.
Here’s a slice of what she had to say when addressing the Anika Foundation in Sydney this week, in response to Treasurer Jim Chalmers’ comment that the RBA’s high interest rates were “smashing the economy”.
“I understand people are hurting from high interest rates,” she said.
“But as I tried to set out in the speech, it’s actually inflation that is causing trouble for people, and it’s affecting everyone.”
Certainly the safest bet appears to be on rates NOT increasing, which allows buyers some confidence in knowing the best is yet to come.
Enjoy your weekend
Matt Lancashire
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