Big bank economist’s shock rate prediction
The man in the hot seat at Australia’s biggest bank has bypassed the Reserve Bank’s next few meetings to November when he expects a shock interest rate move.
The man in the hot seat at Australia’s biggest bank has bypassed the Reserve Bank’s next few meetings to November when he expects the next big interest rate move.
Commonwealth Bank economist Gareth Aird expects no action from the Reserve Bank through until November, when he believes the board will be forced to act on the cash rate target.
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“Indeed the decision next week to leave policy on hold should be straight forward given the inflation data has come in line with the RBA’s forecasts,” he said.
“We continue to see the RBA delivering a first 25bp interest rate cut in November 2024,” he said – which would take the cash rate target to 4.15 per cent.
“The wriggle room on the data configuration that would see the cash rate cut in November is still tight,” he said, “And the risk clearly sits with interest rate relief not arriving until H1 25. But we believe the data continues to evolve in a way that sees the RBA cut the cash rate in November.”
He said energy subsidises working their way through the system to consumers would see the RBA revise headline inflation forecasts over 2024/25.
This as SQM Research Louis Christopher warned over 5000 homes were being sold under distressed conditions in Australia in June, a slight 0.2 per cent monthly change – the highest of which was out of Queensland (1,592) followed by New South Wales (1,300).
The distressed listings data includes not just mortgagee sales, but encompasses divorce sales, deceased estates, urgent sales, desperate sellers, and around 50 other keywords.
SQM’s figures warn that year-on-year, NSW and VIC had the biggest increases in distressed listings of 16.3 per cent and 15.6 per cent respectively in June, while NT rose 15.5 per cent.
One of the cheapest states to buy homes in right now – South Australia – saw a 12.2 per cent rise in distressed listings in June – the biggest monthly rise in the country. The Northern Territory which rose 11.2 per cent, the ACT had a significant rise of 6.7 per cent and Victoria rose 2.3 per cent – though all those were off relatively low bases.
RateCity.com.au research director, Sally Tindall, warned “Australia’s annual inflation rate is now officially tracking in the wrong direction”.
But she added that “over the last few meetings, the RBA has been deploying a ‘wait-and-see’ strategy to see if it can ride out this current blip in inflation without having to fire off a 14th rate hike”.
“Luckily, this (inflation) result still fits within the RBA’s timeline to return inflation back to target by mid-2026, buying it more time to continue with its current plan”.
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According to comparison site Finder money expert Sarah Megginson, 36 per cent of Australians said they struggled to pay their home loan in the first half of 2024.
“That number is only slightly lower in QLD, where 30 per cent of homeowners say they struggle to pay their mortgage,” she said. “This has gone up from 25 per cent of Queensland homeowners who say they struggled to pay their home loan over the same time period in 2022.”
The highest struggle was in South Australia (41 per cent), NSW 39 per cent, Victoria and Western Australia (both 36 per cent).
Originally published as Big bank economist’s shock rate prediction