CBA recommends RBA cut cash rate by the end of the year

Commonwealth Bank economists believe the RBA will pause its tightening cycle towards the end of the year, heralding a massive slump for 2023.

Commonwealth Bank has made a prediction which experts believe means we’re headed for an economic slump.

With weaker than expected recent employment data, ABS retail sales for December down 3.9 per cent, house prices still falling and large volumes of fixed rate mortgages set to expire this year, Commonwealth Bank economists believe the RBA will pause its tightening cycle towards the end of the year.

“CBA is forecasting a soft landing in 2023 as household consumption slows – as evidenced in the bank’s latest credit and debit card spend data,” a recent report read.

“Annual GDP growth is expected to decline significantly to 1.1% per cent at Q4 23 (from 2.6% per cent at Q4 22), with falling inflation also setting the scene for the RBA to commence interest rate cuts in the back end of the year.

Finance expert Dave Taylor of Taylored Advice said the CBA prediction “would suggest the economy’s about to tank”.

Top union boss slams RBA

Australia’s top union boss has slammed the Reserve Bank as being out of touch with the rest of the country and driving low income earners into financial ruin.

It comes after the RBA brought up the cash rate by 25 basis points on Tuesday, from 3.1 per cent to 3.35 per cent, to curb inflation.

This marks the ninth time the interest rate has risen since May last year, with many Australian homeowners struggling to stay afloat.

In all, the rate has jumped 325 basis points in just 279 days, rendering it the fastest and largest rate hiking cycle on record.

Analysis from comparison website Canstar found that for the average Australian on a $500,000 mortgage, their monthly repayments have now jump by $969 per month or $11,628 per year since May.

For homeowners stuck with a $1 million home loan, they’ll be lumping out an extra $1939 a month, which is $23,268 over the next 12 months.

Secretary of the Australian Council of Trade Unions (ACTU), Sally McManus, has shamed the central bank for having no “understanding” or compassion for struggling homeowners and causing “too much pain”.

The CBA reckons the RBA will have to CUT its cash rate by 0.5% at year's end

That would suggest the economy's about to tank

— David Taylor (@DaveTaylorNews) February 10, 2023

Secretary of the ACTU Sally Mcmanus has slammed the RBA for making the lives of low-income earners even harder. Picture: NCA NewsWire / Martin Ollman

Ms McManus had some choice words for the RBA governor Philip Lowe.

“In the tone of things he’s been saying … [there is] not understanding that at the lower levels of labour market and our society there is not, any longer if there ever was, some savings that people are running down, people are struggling,” she said, reports The Guardian.

“We are concerned, very concerned at the direction he indicated they (the RBA) are going to go and dangers for the economy in doing that.

“I’m very concerned that comes from a lack of appreciation of what is happening in parts of society and that’s putting too much pain on people and the effect that might have.”

Mr Lowe all but warned that more rate hikes were on the way, saying on Tuesday that this wouldn’t be the last rate rise of the year.

“The Board’s priority is to return inflation to target,” Mr Lowe said.

“The Board is seeking to return inflation to the two to three per cent range while keeping the economy on an even keel, but the path to achieving a soft landing remains a narrow one.”

In January, the Australian Bureau of Statistics found the annual rate of inflation was at 7.8 per cent, marking the highest yearly increase since 1990.

Reserve Bank of Australia Governor Philip Lowe has been lashed for being tone deaf to the plight of the Australian public. Picture: Sam Mooy/Getty Images

ACTU President Michele O’Neil also lashed the RBA’s latest move, warning that Australians had been pushed to their limit.

“The RBA has almost pushed Australian workers and the economy off a cliff.

“In a painful irony, the greatest cost-of-living pressure on too many Australian workers is now their mortgage repayments thanks to RBA rate rises.

“We now have 1 in 4 workers in this country skipping meals to get by, and an economy showing signs of weakness.

“When the cure is worse than the poison, we need a different cure.”

The union is calling for wages to grow in line with inflation to ease cost of living pressures and give homeowners a little extra money to give them breathing room on their mortgages.

“Wage growth is less than half the rate of inflation and more needs to be done to get wages moving rather than having workers who are able to win modest pay increases having that stripped away again by further rate rises,” Ms O’Neil added.