With the Reserve Bank holding rates at 4.35%, Finsure’s Simon Bednar cautions banks may not pass on future cuts; Mozo’s Rachel Wastell suggests borrowers prepare financially, and Ray White’s Nerida Conisbee notes economic resilience with high job growth but rising youth unemployment.
Conisbee (pictured above left), chief economist at Ray White, highlighted that, despite RBA’s tight monetary policy, the economy remains resilient, largely due to strong job growth.
“If people want a job, they are still able to find one,” she said in a media release.
However, a rise in household spending on travel and recreation has countered some of the benefits of lower inflation. The recent cooling was also partially due to government relief programs, such as the Commonwealth Energy Bill Relief Fund, which helped lower household energy costs.
Youth unemployment, however, is on the rise, nearing 10%, a worrying trend that has economic observers concerned about the long-term impact on young Australians.
Conisbee warned that while current conditions may seem stable, the economic growth rate remains sluggish at just 1% – the slowest since the early 1990s, excluding the pandemic period.
While borrowers may feel a sense of relief with the rate hold, Wastell (pictured above centre), Mozo’s finance expert, advised homeowners to remain proactive.
“A year-long hold after an aggressive hiking cycle is likely giving borrowers hope there is light at the end of the tunnel,” she said in a media release.
Wastell recommended that mortgage holders reassess their finances now, as the big four banks anticipate a rate cut could arrive in early 2025, potentially as soon as February.
Despite the optimism, some analysts, like Finsure CEO Bednar (pictured above right), cautioned that banks may not fully pass on any future rate cuts to borrowers.
“I am concerned that banks will find reasons to not pass on the reduction in full, which will not help ease the pain for borrowers,” he said.
Bednar stressed that brokers will play a critical role in assisting customers when rates eventually drop, helping them to navigate refinancing or improving loan terms.
ABS recently reported a modest 0.2% quarterly increase in the consumer price index (CPI), the lowest quarterly growth since the early pandemic days.
While the drop in inflation was fueled by reductions in electricity and fuel prices, ABS’s Michelle Marquardt acknowledged the complex picture.
“Without the rebates, electricity prices would have increased 0.7% this quarter,” Marquardt said.
With the underlying inflation measure – the trimmed mean – still above target at 3.5%, RBA remains cautious.
Economic signals remain mixed, with rising rental prices and supply chain issues, including fresh produce costs influenced by adverse weather.
Yet, with inflation finally in the target range and economic momentum slowing, many hope the RBA will shift from its holding pattern in early 2025, setting the stage for potential relief for borrowers facing record-high rates.
Read about RBA latest rate decision here. Read the commentaries from Ray White and Mozo.
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