Australians are being warned not to expect interest-rate reductions before Christmas even as pressure mounts on the Reserve Bank to start cutting.
The nation’s central bank will meet on Tuesday to decide the cash rate, with many experts forecasting it will remain unchanged at 4.35 per cent.
After the US Federal Reserve slashed its key interest rate by half a percentage point, the RBA has increasingly come under 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 showed something unexpected.
‘I really do struggle to see why they would do it any earlier unless the underlying inflation rate falls much more quickly than they expected it to,’ he told AAP.
‘Even though the headline inflation rate is going to fall … largely as a result of electricity bill rebates provided by the federal and some state governments, the underlying inflation rate is still likely to be close to 3.5 which is far above the Reserve Bank’s target to begin cutting rates.’
Data from the Australian Bureau of Statistics released earlier in September showed the unemployment rate steady at 4.2 per cent in August.
The monthly consumer price index will be published on Wednesday.
The RBA is under pressure to cut rates but a leading economist thinks it’s unlikely 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 does happen,’ he said.
Treasurer Jim Chalmers has previously criticised the central bank’s rates policy for having contributed to Australia’s lengthy regression in per-capita GDP.
The government is hopeful for rate relief before an election is held in 2025.
Prime Minister Anthony Albanese reaffirmed the RBA’s independence, as the Greens urged the government to intervene 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 overrule the Reserve Bank’s decision.
‘They’re important reforms to strengthen the independence of the RBA and to ensure that it’s essentially set up 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 lower high inflation, which is the underlying cause of high rates.
