Finance guru Mark Bouris makes rates prediction all Aussies want to hear

Finance guru Mark Bouris has made a bold call on the economy in a message that all Aussie homeowners will want to hear.

Finance guru Mark Bouris has predicted interest rates will finally begin to drop in a message all Aussie homeowners will want to hear.

The Yellow Brick Road home loans chairman said rate decreases were in sight for struggling Australians, with the Reserve Bank cash rate at an 11-year high and monthly mortgage repayments surging by 64 per cent in just over a year.

“The real big question today is not whether they are going to put rates up again. It’s how long they are going to hold these rates as they are,” he told Sunrise on Friday.

He warned of a recession unless there was relief for borrowers.

“It’s extraordinary. We’ve had a four per cent increase since a year-and-a-half ago,” he said.

“How long can this country sustain that without going into a recession?

Mark Bouris, Executive Chairman of Yellow Brick Road. Picture: Supplied

“If we see these interest rate increases having an effect on the economy in terms of growth, we saw recently, last week, retail sales are at an all-time low.

“They look very poor. If that bleeds into the rest of the economy and other areas like the cost of coffee and all those things, we will expect to see rate reductions.”

He also heaped praise on Westpac’s outgoing chief economist Bill Evans for being the first expert, in February, to predict seven rate cuts in 2024 and 2025.

“Westpac for example, has been predicting for some time rate reductions in the later part of 2024. For me, the greatest chief economist in the country is Bill Evans,” Bouris said.

“He is at Westpac, he has just retired. He and his team were at one stage very bold saying seven rate reductions in 2024. I think they will pare back from that.

“I think sometime in late 2024, more realistically, is two or three rate reductions.”

Grim RBA prediction

This all comes despite warnings more pain could be on the way as soaring rents and higher power bills crunch household budgets as the RBA on Friday flagged its fight against inflation may still have some way to run.

The quarterly Statement on Monetary Policy, released on Friday, has seen the Reserve Bank slash its short-term forecasts with economic growth expected to falter further.

Aside from the economic shock experienced during COVID-19, Australia’s economy is expected to grow at its lowest rate since 1992.

In May, the central bank expected the economy to expand by 1.2 per cent for 2023, before moderately expanding to 1.4 per cent in the 2023-24 financial year.

RBA governor Philip Lowe has delivered more grim news to Aussie households. Picture: NCA NewsWire / Nikki Short

But according to new forecasts, the bank has moderated its forecasts and now expects the economy to grow by just 0.9 per cent by the end of the year. GDP growth will tick up to 1.6 per cent by the end of 2024 and 2.3 per cent by the end of 2025.

While a new set of inflation numbers released by the ABS in July came in below traders’ expectations at 6 per cent, the Reserve Bank’s outlook for inflation has barely changed from three months ago.

It will still take until mid-2025 before inflation reaches the Reserve Bank’s target band of 2-3 per cent.

Rental costs, a primary contributor to broader inflation measures, are forecast to increase further over the period ahead as rental vacancy rates remain extremely low, and new housing fails to keep up with booming population growth.

“Strong population growth is occurring at a time when the rental market is already very tight and it will take time for supply to respond,” the statement said.

“Rent inflation is expected to continue to pick up over the next year or so, and to add materially to inflation over the forecast period.”

The Reserve Bank has refused to rule out keeping the cash rate on hold. Picture: NCA NewsWire / Nicholas Eagar

Energy prices are anticipated to worsen the cost-of-living crunch in the coming year, but rebates and subsidies will help take some of the sting out of power bill pain.

“The impact of increases in electricity prices … will be partially offset by government rebates under the Australian government’s energy price relief plan and various state government initiatives,” the report read.

The RBA said Australia’s wages bill would pick up to its fastest pace in a decade, as workers’ pay packets struggled to keep up with the rising cost of living.

“People with jobs are now also seeking food support assistance more often than in the recent past and higher interest rates have contributed to an increase in demand for services from people with a mortgage,” the bank stated.

The unemployment rate is expected to climb to 4.5 per cent by mid-2025. NCA NewsWire / Nicki Connolly

However, the central bank also cautioned that recent government intervention on minimum and award wages could act as a benchmark across the economy. Under this scenario, inflation would be “persistently higher” until the end of 2025.

The unemployment rate is also predicted to rise, with the RBA noting that an additional 140,000 people are expected to be out of a job by June 2025.

Despite experiencing 12 rate hikes since May 2022, households should brace for future rate hikes after the RBA said Australia could not yet declare victory against runaway price pressures.

“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon the data and the evolving assessment of risks,” the report cautioned.

“The board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome.”