Key takeaways
The RBA left interest rates unchanged at its December 2024 meeting. However, its language shifted, removing any suggestion of further rate hikes and dropping the "not ruling anything in or out" stance.
Australia's economy grew by just 0.3% in the September quarter and 0.8% over the year. Slower growth reflects the impact of higher borrowing costs and inflation on households and businesses.
Higher interest rates and inflation have dampened disposable income, curbing consumer spending, particularly in discretionary retail and construction sectors.
Contrary to expectations of rising unemployment due to tighter monetary policy, the jobless rate decreased from 4.1% to 3.9% in November 2024. Western Australia recorded the lowest unemployment figures, underscoring regional variations in labor market strength.
National auction clearance rates were solid but slightly lower as the holiday season approached, averaging 54.1% for the week compared to 60.1% the previous week. The spring selling season concluded with steady results, although activity predictably slowed toward the year-end.
Last week, the Reserve Bank board met for the last time this year, and while it didn’t change the cash rate, it did change the ‘tone’ of its communication to the market about rate cuts and, importantly, rate rises that we can now confidently argue are off the table.
The post-meeting statement highlighted that ‘some of the upside risks to inflation appear to have eased’.
The possibility of a rate hike was no longer canvassed, and it dropped the ‘not ruling anything in or out’ language that had been in the post-meeting statement for most of the year.
After the RBA’s statement, the money market changed its tone and switched its expectations, thinking that the first interest rate cut would occur in February next year.
Especially as the National Accounts showed we’d been growing by 0.3% for the September quarter and 0.8% for the year
However, that all changed when the Australian Bureau of Statistics delivered the latest jobs report. Despite 13 interest rate cuts and a slow-growing economy, unemployment fell from 4.1% to 3.9%!
So, what’s really going on with our economy, employment and interest rates?
That’s what I discussed in today’s Property Insider chat with Dr Andrew Wilson, chief economist of My Housing Market.
Rates remain on hold
The RBA kept interest rates on hold at its December meeting, but the board generative changed hinting at potential rate cuts earlier than previously expected, even though the timing remains uncertain.
Watch this week’s Property Insider chat as Dr Andrew Wilson discusses the various factors that market sentiment from a February 2025 rate cut to later in the year.
Australia's annual GDP growth has been slowing throughout the year, reflecting a cooling economy amid rising cost pressures and higher interest rates.
The latest figures show that economic activity has softened as households and businesses grapple with the effects of tighter monetary policy.
Consumer spending, a critical driver of the Australian economy, has been noticeably subdued, with higher borrowing costs and inflation curbing disposable incomes and dampening retail activity.
- Also read:Adelaide housing market update | December 2024
- Also read:Perth housing market update | December 2024
- Also read:Brisbane housing market update | December 2024
- Also read:Interest Rate Mystery: Just look what happened last week! | Property Insiders
- Also read:Sydney housing market update | December 2024
This slowdown is particularly evident in sectors like discretionary retail and construction, which are more sensitive to interest rate movements.
This was likely one of the reasons the RBA changed its narrative after its last meeting, and the money market expected interest rates to fall sooner rather than later.
But then the latest ABS statistics showed that Australia's unemployment levels, which were expected to rise more significantly by now, have instead held fallen, adding a layer of complexity to the RBA's decision-making process.
Watch this week's Property Insider chat as Dr. Andrew Wilson explains these unemployment figures reflect a strong economy and also mean inflationary pressures may take longer to subside, delaying the justification for rate cuts.
Latest unemployment stats
The ABS report that in seasonally adjusted terms, in November 2024:
- The unemployment rate decreased to 3.9%.
- The participation rate decreased to 67.0%.
- Employment increased to 14,535,500.
- Employment to population ratio increased to 64.4%.
- The underemployment rate decreased to 6.1%.
- The monthly hours worked decreased to 1,965 million.
- Full-time employment increased by 52,600 to 10,068,100 people.
- Part-time employment decreased by 17,000 to 4,467,400 people.
In this week’s Property Insiders chat, Dr Wilson explains that the jobless figures are still low despite our immigration and high interest rates.
As you can see from his job below, Western Australia had the lowest jobless figures.
Steady finish to the 2024 Auction Season
The 2024 auction season has principally concluded with solid results overall although clearance rates in some capitals were predictably lower as the holiday season rapidly approaches.
The national weekend auction market reported a clearance rate of 54.1% over the past week, which was lower than the 60.1% reported over the previous week – and also below the 58.7% recorded over the corresponding weekend last year.
Melbourne recorded a clearance rate of 63.7% over the past week.
Sydney recorded a clearance rate of 61.7% over the week, which was lower than the 62.4% recorded over the previous week and well below the 66.2 % rate recorded over the corresponding weekend last year.
Clearance rates have continued to reflect generally solid results for most sellers over the spring selling season although activity has predictably waned as the season concluded.
