There's a bit of good news for Australians in mortgage stress with new inflation data increasing the odds of a February rate cut. Despite an increase in headline inflation the Reserve Bank's preferred measure of price rises is down. Financial markets are betting a rate cut next month is now more likely than not.
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00:00For mechanic Paul Crookshank, keeping customers on the road is one thing, keeping up with
00:07costs is another.
00:08Our work cover's gone up 40%, parts and delivery are up, labour cost is up, everything's up.
00:15And there's only so much he can pass on to customers.
00:19We can't put our prices up as quick as all the other costs are going up.
00:24The latest figures show annual inflation rose slightly, but the Reserve Bank's preferred
00:28measure of core inflation, which strips out volatile price changes, fell from 3.5% to
00:353.2%.
00:37The markets in the last little while have increased their expectations of a rate cut
00:45in February.
00:46Underlying inflation is not where it needs to be.
00:49Now you don't need to tell any Australians that, they know it.
00:52Over the past year, electricity bills have tumbled due to government rebates and fuel
00:58also fell, but the rising costs of food, alcohol, insurance and rents remain painful
01:04pressures.
01:05You go to Woolies and you come out, one bag costs you $50, you might have five things
01:10in it.
01:11Like it's really expensive.
01:12What many Australians are hoping for is a drop in interest rates.
01:16The Reserve Bank will be closely watching the quarterly inflation figures set to be
01:20released at the end of the month.
01:22While analysts believe those figures will remain low, they're split on when a rate
01:27cut might actually happen.
01:29The November inflation data was actually a bit weaker than expected.
01:32That does raise the probability of a rate cut in February.
01:36February is absolutely a live option, however, if the RBA wants to play it safe, they could
01:42wait until May, potentially even further.
01:45If the RBA cuts rates by a quarter of a percentage point in February and lenders pass it on,
01:52on a $500,000 home loan will fall by $77 a month and $154 a month on a million dollar
02:00mortgage.
02:01If you've got a mortgage on top of everything else, it is really hard.
02:05With an election looming, cost of living relief could be around the corner.