Property Insights with Mark Bouris returns with our monthly expert guest, economist Stephen Koukoulas, to discuss all the latest market updates following the release of the quarterly GDP and inflation numbers ahead of the RBA’s March 19th board announcement.
Mark and Kouky’s comprehensive analysis breaks down current and expected trends in 2024, suggesting rates will hold until mid – late 2024 as the economy continues to slow. The analysis takes a deep dive into the shifts we can expect to see before the RBA cuts rates, with a particular focus on GDP analysis and the impact of rising unemployment rates.
Key Takeaways:
- ‘We’re going to get worse before we get better.’ GDP growth remains weak, with a quarterly growth rate of 0.2% and an annual rate of 1.5% reflecting sluggish economic activity.
- Unemployment continues to rise, reaching 4.1%. Given its momentum over the last 18 months, Kouky suggests the RBA’s 4.5% is optimistic and worries that it may reach 5% in spite of any possible governmental efforts.
- GDP analysis reveals highs and lows as business investment sees an 8% increase in real terms, possibly linked to steady iron or coal exports, while other significant factors drop; dwelling investment continues to decline and household consumption made no contribution to GDP this quarter, even with population growth at 0.5%.
- ‘The next move in interest rates in all the big economies is down – we’re going to be part of that.’ Inflation sits at 3.4% with Mark and Kouky estimating inflation to be in the target range of 2-3% when numbers for the next quarter are realised. This puts Australia in a position to follow global economies into a rate reduction cycle.
- ‘I don’t want to be too gloomy but I’m getting more worried by the month.’ Kouky’s analysis doesn’t leave him feeling positive that the economy will see a strong rebound but they see some potential for economic recovery, especially with supportive monetary policies or preemptive RBA action.
- When will rates be cut? Both Mark and Kouky conclude the RBA will hold rates again this month. Reviewing the big bank predictions, their analysis suggests a likely 4 to 6 rate cuts between the middle of this year and mid-2025 if trends continue – freeing up cash flow for individuals and businesses. Kouky’s guide? ‘When you see unemployment rates at 4.5 or going past 4.5 you can expect to see rate cuts within 2-3 months’.
