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Australians have been in a holding pattern with the Reserve Bank of Australia’s (RBA) cash rate since it hit 4.35% in November 2023. As the RBA Board prepares for its next meeting on Tuesday, December 10, 2024, Australians’ are playing the waiting game – will the RBA cut rates for Christmas?
If you’ve been following along at home, you’re probably feeling a bit sceptical and you’re likely right – if history and current data offer any clues, rate cuts seem highly unlikely. In fact, the consensus among expert commentators and financial institutions is that we’re in for a prolonged pause, with most forecasts pushing rate cuts well into 2025.
Current Cash Rate and Inflation Update
On a positive note, inflation is finally settling within the target range of 2-3%, with the latest headline inflation figure at 2.1%, a significant improvement from its December 2022 peak of 7.8%. While the journey back to stability has been uneven, this progress offers some hope for households and businesses holding out for change.
While indicators are shifting, the RBA has made it clear that consistent progress is necessary before any rate cuts are implemented, particularly until underlying inflation drops below 3%.
What the Experts Say
The RBA continues its cautious stance. It has signaled a gradual easing of rates, contingent upon steady improvements in inflation metrics. This cautiousness is mirrored by Australia’s major financial institutions. Westpac Chief Economist Luci Ellis recently noted that the first rate cut might come even later than May 2025 if inflation fails to align with the RBA’s forecasts.
Big Four Banks Predictions
| Bank | Cash Rate Prediction | Rate Cut Prediction |
| NAB | Hold – 4.35% | May 2025 |
| Commonwealth Bank | Hold – 4.35% | February 2025 |
| ANZ | Hold – 4.35% | May 2025 |
| Westpac | Hold – 4.35% | May 2025 |
The Path Ahead
There’s no doubt the combination of stabilising inflation, high interest rates, and market uncertainty presents both challenges and opportunities for households and property owners. But it’s the cash rate time frame that’s leaving a lot up in the air for those trying to make decisions around property investments at the moment.
As Mark Bouris and Stephn Koukoulas point out in the latest Property Insights, there are signs that the RBA does not expect the inflation changes they are looking for until 2026. This has led to some concerns that rates might not shift next year at all.
Koukoulas, however, sees a cautious and gradual shift in rates into mid-2026, should sustained inflation improvements be observed.
“So if we get to the middle of 2026, inflation’s at 2.5 and looks like hovering around 2.5%, I reckon we’ll have had 100 points (or 1%), roughly, of rate cuts over that time,” said Koukoulas.
“Now they might start later rather than sooner, but if we get that inflation number of say 2.9% in the not too distant future, the RBA might announce a 0.25% cut, they’ll do what we might call baby steps. Very cautious, almost dipping their feet in the water.”
While rate cuts could bring relief in 2025, Bouris reminds us that property investment is ultimately a long-term game. Keep up the careful planning, resilient attitude, and focus on fundamentals, to navigate the current environment and position ourselves for success in the years ahead. Even if rate cuts are well into 2025 or beyond.
Stay informed. Stay prepared. And remember, navigating uncertainty starts with understanding the current landscape.
