The RBA will start cutting rates in February, according to the median forecaster in the Financial Review’s quarterly survey of economists, handing federal Labor an economic win.
Already a subscriber?The Reserve Bank of Australia will begin cutting interest rates in February, handing Labor a much-needed economic win before the federal election if economists are right about the direction of the central bank’s policy path.warn it could be later than February, and that borrowers’ hopes of rate relief may be hobbled by a robust labour market, population growth, and the record-breaking sharemarket run.
“We expect the RBA’s rate cutting cycle to be roughly six months behind the US, reflecting the lower peak in the RBA cash rate and later cycle of inflation, both on the way up and now on the way down.” “This has shifted the balance of demand and supply for labour in our economy from labour abundance to labour scarcity,” he said.
“Waiting until the destination is reached before normalising the cash rate means unemployment will rise by more than is both necessary and desired.” Michael Knox, of Morgans Financial, argued that this employment bias had limited the RBA’s ability to raise rates high enough to smash inflation. “This means that the RBA must maintain a lower maximum interest rate, and this could result in rates staying at the current level until at least the second half of 2025,” he said.
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