Cash rate reduction could be on the cards in 2024
Home buyers and mortgage holders may be able to expect a drop in the cash rate over the coming year, if the latest inflationary indicators are anything to go by.
The latest Consumer Price Index (CPI) insights from the Australian Bureau of Statistics have pointed to an improved position for inflation.
CPI rose 4.3 per cent in the 12 months to November 2023, a drop from the 4.9 per cent result across the 12 months to October 2023.
Real Estate Institute of Australia (REIA) president, Leanne Pilkington, noted November’s numbers continue the downward trend being seen in inflation, following on from the September quarter’s 5.4 per cent result and the 6 per cent figure seen across the June quarter.
It’s also well down on the inflationary peak, which leaped to 8.4 per cent in December 2022.
Ms Pilkington remarked that “the 13 rate hikes by the RBA since May 2022 are slowly but surely slaying the inflation dragon”.
She explained that the current inflationary trajectory tracks with findings contained within a recently released UN report, World Economic Situation and Prospects, which expects Australia’s inflation to come down to 3.3 per cent across the coming year.
This is also consistent with Treasury forecasts, which expect inflation of around 3.75 per cent over this financial year.
Taking a closer look at the items contained within the CPI, the president stated: “The annual movement for the monthly CPI excluding the volatile items of fruit and vegetables, automotive fuel and holiday travel and accommodation, rose 4.8 per cent in November, down from 5.1 per cent in October.”
Annual trimmed mean inflation was also lower, down at 4.6 per cent in November, from the 5.3 per cent increase on show earlier.
“The most significant contributors to the annual increase in the November monthly CPI indicator were housing (up 6.6 per cent), food and non-alcoholic beverages (up 4.6 per cent), and alcohol and tobacco (up 6.4 per cent).
Ms Pilkington also noted that rents increased 7.1 per cent in the 12 months to November – a lift from the 6.6 per cent seen in the 12 months to October.
As to what the latest CPI data means, Ms Pilkington noted that “the lagged response to the successive interest rate hikes are showing up in the CPI”.
“The financial markets are anticipating that if this continues home buyers can anticipate a rate reduction,” the president outlined.
More from this writer:
-
Gen Z and Millennials set to strike property market within 5 years
-
‘Cyber criminals have their sights set on property transactions’ as alarm raised for investors
-
5 Wollongong, Central Coast and Sydney suburbs earmarked for development
-
What are Australia’s best regions for rental yield?
-
Is there already a canary in the coal mine for Australia’s 1.2m homes target?
-
Geelong and Bendigo shine in ‘balanced’ Victorian market
-
Will a university education help you buy a house?