The Reserve Bank of Australia is due to make its next interest rate decision soon. As inflation slows faster than expected, economist Gemma Dale says so will rate rises.
Category
📺
TVTranscript
00:00 We are forecasting no increase for this meeting and we are not alone in that. That seems to
00:07 be the general consensus that we can sit tight at this point in time. We have one more increase
00:12 pencilled in for November, but it feels like the risks to that forecast are to the downside
00:18 that if anything happens it will be that we don't increase further and that it is highly
00:23 unlikely we will see several increases from here that are going to be flat. And then really
00:28 the question becomes when do we start to cut? When do we start seeing interest rates start
00:33 to come down? At this point we are anticipating that in the second half of next year and down
00:37 to around 3% 2025. So not a lot of upside risk to rates at the moment in our view. I
00:43 think really the data is starting to soften. That has become increasingly clear and the
00:48 RBA can be relatively comfortable that the job is okay for now.
00:53 So we have had obviously inflation come down a little bit more than we were anticipating.
00:58 Is that a trend we are likely to see continuing? What else is in play here with that?
01:02 That one is a bit of a tricky question. It is the monthly data we have just seen and
01:05 the monthly is very different to the quarterly. It only captures about two thirds of the total
01:09 basket. It is really heavily weighted towards goods. So it doesn't capture services inflation
01:15 and services where you see the wage pressure coming through. So that is what we are most
01:19 interested in seeing that quarterly figure. Is there really upward pressure from wages
01:25 that is going to start feeding back in? You see that sort of not an upward cycle like
01:29 the 70s, not that kind of thing, but some concern that there is a bit of upward pressure.
01:33 Then we also have the issue that oil prices are starting to rise again. $85 a barrel at
01:37 the moment, that is the highest since November. We did see a bit of a down tick in fuel costs.
01:42 They are quite meaningful. So is that going to be a bit of an issue?
01:45 We also had housing affordability on the news as a big story for us yesterday because it
01:52 is looking like housing affordability is still a real big issue for people. It is worse than
01:58 it has been in 30 years. Prices are still going up though. So how is that going to play
02:02 into things? It is such a tricky one. Housing affordability
02:06 just doesn't seem to ease as an issue in Australia. We saw prices come off a little last year
02:12 as rates started to increase and increase so dramatically. It was such an enormous shock
02:15 to go from 0.1% to 4.1% in 18 months. That was quite extraordinary. Yet that has an enormous
02:22 impact on affordability because then your mortgage rates go up. The fact that prices
02:26 came down briefly didn't help anyone very much. The issue is we have record immigration
02:30 at the moment. Demand is very high for housing. Because a meaningful proportion of the population
02:36 can afford housing. The activity is in that sector but it doesn't dramatically feed into
02:43 economic growth for example. This is transactional data that is not necessarily growth.
02:47 [BLANK_AUDIO]