Australians are being warned not to expect any interest rate cuts before Christmas, even as pressure mounts on the Reserve Bank to start cutting rates.
The country’s central bank will meet on Tuesday to decide on the cash rate, with many experts predicting it will remain unchanged at 4.35 percent.
After the US Federal Reserve cut its key interest rate by half a percentage point, the RBA has come under increasing pressure to follow suit and bring forward mortgage relief.
However, economist Saul Eslake predicted there would be no rate cut until February 2025 unless the data show something unexpected.
“I really struggle to understand why they would do it earlier, unless the underlying inflation rate falls much more quickly than they expected,” he told AAP.
‘Although the headline inflation rate will fall… largely as a result of discounts on electricity bills provided by the federal government and some state governments, the underlying inflation rate will probably still be close to 3.5, which is well above the Reserve Bank’s target for starting to cut rates.’
Australian Bureau of Statistics data released in early September showed the unemployment rate held steady at 4.2 percent in August.
The monthly consumer price index will be released on Wednesday.
The RBA is under pressure to cut rates, but one leading economist thinks it is unlikely to do so in 2024. Pictured: RBA Governor Michele Bullock
Graham Cooke, head of consumer research at Finder, was more optimistic about the likelihood of a cut in November.
“It will be an early Christmas present for households in Australia, if it happens,” he said.
Treasurer Jim Chalmers has previously criticised the central bank’s rate policy for contributing to Australia’s prolonged decline in GDP per capita.
The government hopes to ease rates before elections are held in 2025.
Prime Minister Anthony Albanese reaffirmed the RBA’s independence, while the Greens urged the government to step in and cut rates.
Mr Albanese said Labor remained committed to changes recommended in a review of the central bank, which included removing the Treasurer’s power to override the Reserve Bank’s decision.
“These are important reforms to strengthen the independence of the RBA and ensure that it is fundamentally fit for the job it needs to do in the future,” the Prime Minister told reporters in Canberra on Monday.
Mr Albanese said the government was doing its part to reduce high inflation, which is the underlying cause of high rates.
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