This article is from the Australian Property Journal archive
THERE are no early Christmas presents from the Reserve Bank in 2024, with interest rates remaining on hold for a ninth consecutive meeting – but a change in tone in its post-meeting statement reignited hopes for a rate cut early in the new year.
With core inflation remaining high, labour markets holding tight, and rising geopolitical risk, hopes for a rate cut to ease pressure on households had been gradually pushed back further and further in the back half of this year, to mid-2025.
However, while holding the cash rate at 4.35% in a unanimously expected decision, the RBA’s post-meeting statement said, “The board is gaining some confidence that inflationary pressures are declining in line with these recent forecasts, but risks remain,” the RBA’s post-meeting press statement read.
Notably, its statement no longer includes the line that the RBA is “not ruling anything in or out” on interest rate increases or cuts.
It followed GDP figures last week showing growth of a paltry 0.8% over the year to September – the worst reading outside of COVID since 1991 – which moved the needle on the timing of a much-anticipated rate cut.
“While underlying inflation is still high, other recent data on economic activity have been mixed, but on balance softer than expected in November,” the board said.
“Taking account of recent data, the board’s assessment is that monetary policy remains restrictive and is working as anticipated. Some of the upside risks to inflation appear to have eased and while the level of aggregate demand still appears to be above the economy’s supply capacity, that gap continues to close.”
“The board is gaining some confidence that inflation is moving sustainably towards target.”
ANZ head of Australian economics, Adam Boynton, described the RBA’s shift in tone as a “dovish step”.
“Our own view remains that May is more likely than February for the first cut, although the ultimate timing will depend on the data over coming months,” Boynton said, noting the December quarter CPI inflation data release on January 29th, as well as November and December labour market data and household spending trends.
The RBA board’s next meeting is in February.
Gentle push for housing market in 2025
Graham Cooke, head of consumer research at Finder, said many can’t wait for a rate cut.
“Thousands of stressed homeowners can’t manage much longer with soaring mortgage costs smashing household budgets.
“While we expect the RBA to start cutting the cash rate next year, many will struggle through the festive season with less money to spend than in previous years.”
High mortgage rates and soaring prices have driven housing affordability to its worst level on record, although price growth has been slowing.
CoreLogic Asia Pacific research director Tim Lawless said, “Whatever the timing, once interest rates do start to reduce, it might be enough to stave off further declines in home values, or even support some subtle growth across the more affordable markets”.
“However, the rate-cutting cycle is likely to be a cautious and gradual one, suggesting we aren’t likely to see a return to the frothy growth conditions of recent cycles any time soon.”
Australia’s housing market had been set for “a year of two halves” in 2025, according to Domain, with a mid-year interest rate cut to reverse a weak first-half performance and spark price growth,
