RBA On The Brink: Rate Cut Speculation Heats Up

0

The survey, conducted as part of the Finder RBA Cash Rate Survey, reveals that 73% of economists and market specialists foresee a 25-basis point rate cut at next week's meeting. This adjustment could lower the policy rate from 4.35% to 4.10%, marking the first decrease in five years, according to findings initially reported by Patrick Buncsi at Financial Services Online.

While most forecast the cut for February, a subset of experts opts for alternative timelines. Five survey participants predict an April reduction, whereas two others anticipate a rate cut happening by May. Divergent opinions highlight the complexity of the economic landscape and the challenges faced by policymakers.

Shane Oliver, chief economist at AMP Capital, is among those expecting the RBA to act decisively. "Underlying inflation is falling faster than the RBA expected and has been running around target over the last six months, economic activity is a bit weaker than expected and Trump’s trade war poses more risks to Australian growth than inflation," Oliver remarked, pointing to international tensions adding weight to the decision.

The prospect of a rate cut is driven not only by global factors but also by domestic concerns, including election year dynamics and noteworthy dips in monthly inflation figures. Critics argue that the combination of weak growth and international trade volatility necessitates a proactive approach from the RBA.

Despite the apparent urgency, some economists urge caution. QUT Adjunct Professor Noel Whittaker is sceptical of a prompt cut, citing persistent inflation within the building sector, severe labour shortages, and robust employment figures. "The problem is inflation in the building industry remains massive, labour shortages are severe, and the job market is still strong – keeping inflationary pressure on the economy," Whittaker notes.

Other analysts mirror Whittaker's concerns, pointing towards stubborn core inflation rates and price pressures within specific sectors. Sean Langcake of Oxford Economics Australia warns that the February decision is closely contested. He elaborates, "The February decision will be a very close run. Inflation in Q4 was a little weaker than the RBA expected."

Langcake expressed the ongoing deliberation, cautioning that despite weaker inflation indicators, "Services inflation is still looking very strong – a byproduct of the labour market still operating beyond its capacity." He suggests the RBA might delay action to observe labour market developments over the coming months.

The cash rate has remained steady since November 2023, maintaining a level of 4.35%. Nevertheless, as economic tides shift, the RBA faces critical decisions that could reshape the financial landscape for Australian consumers and businesses alike.

Published:Monday, 17th Feb 2025
Source: Paige Estritori

Share this news item:

Finance News

Coalition's Proposal Simplifies Tax Deductions for Business Meals 26 Feb 2025: Paige Estritori The Coalition has introduced a proposal to alleviate tax burdens on small business owners, which could notably benefit financial planning practices. Under current tax regulations, expenses related to meals and entertainment are generally non-deductible unless fringe benefits tax (FBT) is paid at a substantial rate. This has discouraged professionals from organizing off-site meals for employees and clients. - read more

Telstra Boosts Dividend and Announces $750 Million Share Buy-back 20 Feb 2025: Paige Estritori Telstra, Australia's leading telecommunications giant, has unveiled a significant financial move with an increase in its dividend and plans for a substantial share buy-back initiative. Following a notable 7.1% rise in first-half profit, the company aims to allocate up to $750 million for repurchasing shares. - read more

Victoria's Land Tax Shift: A Boon for First-Time Home Buyers Amidst Investor Retreat 20 Feb 2025: Paige Estritori In recent findings by Ray White, reports indicate a notable retraction of property investors from Victoria due to increased land tax rates introduced by the state government. The data highlights that investors owned over one-third of Melbourne homes auctioned by Ray White in the past year and 32.2% of regional Victorian homes. - read more

Softer Employment Figures Could Ease Inflation Concerns 20 Feb 2025: Paige Estritori In light of recent economic indicators, Australia's central bank may find comfort in softer job growth numbers. Despite earlier concerns over potential interest rate hikes, the Reserve Bank of Australia (RBA) could see current trends as easing pressure on inflation. - read more

FAAA Questions Significant Rise in AFCA Claims Handling Costs 20 Feb 2025: Paige Estritori The Financial Advice Association of Australia (FAAA) is pressing the Australian Financial Complaints Authority (AFCA) to justify projections indicating a substantial increase in its claims handling costs. According to an actuarial report, these costs are expected to jump from $12,450 per claim in 2024/25 to $21,334, a surge that raises concerns among financial advisors and industry stakeholders. - read more