Five key household expenses that are set to fall in 2024

Welcome relief looms for households in 2024 after living costs surged for two years. Here’s where economists see the likely falls.

Two years of surging inflation and home loan interest rates have left few households unscathed, but 2024 is shaping up to deliver some much-needed relief.

Many key costs are already falling or are expected to fall during the year as the pressures that pushed prices higher continue to ease.

The latest monthly Consumer Price Index data, for November, puts Australia’s annual inflation at 4.3 per cent – well below the 8.4 per cent hit just over a year ago – and many forecasters believe it will continue dropping and prompt the Reserve Bank of Australia to cut official interest rate.

Changing costs can impact consumer spending and saving decisions, so it is good to have an idea of where prices are most likely to drop in 2024.

1. MORTGAGES

When the RBA cuts its cash rate, borrowers with variable-rate home loans will cheer after battling 13 rate rises since May 2022 that have propelled their monthly repayments up to 60 per cent higher.

While some economists expect another rate rise as soon as February, many tip cuts from later this year – possibly before mid-year depending on economic data.

CommSec senior economist Ryan Felsman expects cuts from September and says the RBA will be “quite reluctant” to lift again against a backdrop of rising unemployment and a weak economy.

“The need for further rate rises has dissipated,” he says.

BetaShares chief economist David Bassanese also expects a RBA rate cut in the second half of 2024.

Family holidays will hopefully become cheaper this year. Picture: iStock

“We are starting to see at least one cut priced into the market,” he says.

But nothing is guaranteed. “There’s an important CPI report in late January – if that is disappointingly high the RBA may raise rates,” Bassanese says.

“We may get a rate hike and a rate cut in the same year.”

2. HOLIDAYS

The cost of travel soared as people spread their wings with gusto following the pandemic, but normality is returning.

“We have already seen airline prices stop rising,” Bassanese says.

“We may see some declines in holiday and hotel prices – as pent-up demand for overseas travel is satiated there will be less demand for flights.”

AMP chief economist Shane Oliver says the price of a holiday “might come off a bit”.

“I think you have seen the worst in travel costs,” he says.

3. FOOD

A Senate Inquiry into supermarket prices is under way and this could put downward pressure on the costs of key grocery items. Submissions close on February 2 and a final report is to be presented by May 7.

This magnifying glass on supermarket costs comes amid complaints that cuts in wholesale meat prices were not passed onto customers.

“Food items are tricky because they bounce around a lot and the weather affects that,” Oliver says.

For example, meat prices were impacted by farmers selling livestock cheaply ahead of an expected drought, but then rains came, he says.

4. HOUSEHOLD GOODS

Furnishing your home and clothing yourself could soon be cheaper.

“Price pressures are coming off there, and it’s highly discretionary – when household budgets are stressed people spend less on these items,” Oliver says.

“You will be getting better bargains at sales,” he says.

Bassanese says the cost of clothing, footwear and furniture already has started falling.

“The strengthening Aussie dollar will put downward pressure on import prices, and a lot of consumer goods are imported.,” he says.

5. ELECTRONICS

“We will see further declines in the usual suspects – things like consumer electronics,” Bassanese says.

AMPs Oliver says the prices of some electronic goods have been stronger in recent times because of supply shortfalls.

“These pressures are coming off the boil now,” he says.

“Electronic goods are the ultimate discretionary item.”

Clothing and footwear costs are falling in a welcome trend for shoppers. Picture: iStock.

FALLING INFLATION

December 2022 8.4%

January 2023 7.5%

February 6.8%

March 6.3%

April 6.7%

May 5.5%

June 5.4

July 4.9%

August 5.2%

September 5.6%

October 4.9%

November 4.3%

Source: ABS Monthly CPI Indicator, RBA