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It’s a packed week, with a Federal Government Budget announcement and the release of crucial inflation data, soon to be topped off by next Tuesday’s Reserve Bank of Australia (RBA) cash rate decision.
For homeowners, property investors, and first-home buyers, this decision isn’t just about headlines, it directly impacts mortgage repayments, property affordability, and purchasing power.
Following February’s first rate cut of this cycle, the cash rate was brought down to 4.10%, but debate raged on about whether we will see further cuts in the coming months.
Economists and everyday Australians alike are asking one key question: Will the RBA deliver another interest rate cut?
With the federal budget and inflation data offering both promise and concern, here’s what factors could influence next week’s RBA decision.
Why an Interest Rate Cut Could Be on the Horizon
1. Inflation Continues to Ease
Australia’s inflation rate is finally showing signs of relief. February’s annual inflation was “stunning” according to economic expert Stephen Koukoulas. Annual inflation dropped to 2.4%, comfortably within the RBA’s target range of 2-3%.
This is the seventh consecutive month inflation has remained on target.
Additionally, “trimmed mean” inflation (which excludes volatile items like food and fuel) dropped to 2.7%, and has been in the RBA’s target range for three consecutive months.
Koukoulas, writing for Yahoo finance says, “With interest rate settings still oppressive, on inflation grounds alone, the case for an interest rate cut is strong.”
For the RBA, this data alone could be seen as a green light to consider further rate cuts. Lower inflation reduces the need to keep borrowing costs elevated, which could translate to a cash rate reduction.
The Influence of the Federal Budget
Earlier this week, the Federal Government announced a budget aimed at easing cost-of-living pressures while spurring growth. Measures include targeted support for households and small businesses, including the continuation of the energy rebate for all households.
While these fiscal policies may assist the economy in time, banks and leading economists suggest that this new spending plan by the Federal Government will do little to lend support to any arguments for an April rate cut.
The general professional consensus leans toward reductions commencing in future months. Money markets are currently pricing in only a slim chance, roughly 8%, of the RBA moving the cash rate at next week’s meeting.
Predictions from Australia’s Major Banks
Australia’s big four banks have weighed in on this year’s potential interest rate trajectory, offering slightly different takes:
- Westpac, CBA and NAB are all forecasting the cash rate to drop to 3.35% by the end of 2025. CBA expected quarterly rate cuts in 2025.
- ANZ, however, is more conservative, expecting just one cut in August, which would bring the cash rate to 3.85%.
Source: Cantstar
What This Means for You
If the RBA does deliver rate cuts later this year, here’s how it could potentially affect Australians:
- Homeowners: A rate cut of 0.25% could reduce mortgage repayments by as much as $104 per month on a typical home loan, offering much-needed relief.
- First-Home Buyers: Lower interest rates may improve borrowing capacity, allowing newcomers to better compete in a tightening market.
- Property Investors: Reduced borrowing costs could increase demand and boost property values, potentially benefiting existing investors.
What Comes Next?
Mark Bouris urges all home owners to “be proactive” about their home loan. He says, “it’s essential to regularly review your mortgage to ensure you’re not paying more than you need to.”
“Interest rates and lending conditions change over time, and lenders are competing for your business. We’re seeing fixed rates for new customers being cut almost across the board by lenders, so what may have been a competitive deal a few months ago could now be costing you unnecessarily.”
“A good mortgage broker has the expertise to help you identify the most suitable options for you in the market, potentially saving you thousands over the life of your loan.”
For the latest updates and insights, tune in to the Property Insights podcast with Mark Bouris
Want to make sure you’re getting the best deal possible? Contact us today to talk to our home loan experts.
