The ABS monthly CPI indicator, released today for October, shows headline inflation has remained steady at an annual rate of 2.1%.
While this is close to the bottom of the RBA’s target band, the data has been heavily skewed by the government’s temporary energy bill relief rebate.
The central bank’s preferred measure of inflation, trimmed mean, rose from an annual rate of 3.2% in September to 3.5% in October in the monthly dataset.
However, it’s worth noting the RBA places significantly more weight on the quarterly ABS CPI results rather than the more volatile monthly figures.
Rate cuts not on the immediate horizon
The RBA’s latest Monetary Policy minutes from the November meeting, released last week, said the Board would consider cutting the cash rate if inflation declined “materially more quickly than currently forecast”, however, it would need to see “more than one good quarterly inflation outcome to be confident that such a decline in inflation was sustainable.”
This means borrowers are looking at a waiting game until at least February 2025 and more likely May 2025.
Even the big four banks are divided on when rates might start to fall.
Current big four bank cash rate forecasts
| First cut | No. of cuts forecasted | |
| CBA | Feb-25 | 4 |
| Westpac | May-25 | 4 |
| NAB | May-25 | 5 |
| ANZ | Feb-25 | 3 |
While CBA and ANZ forecast a cut as early as February, Westpac and NAB predict May 2025 as the more likely timeline.
Regardless of the timing, these banks anticipate up to five cuts through 2025, giving hope to borrowers feeling the pressure.
Canstar.com.au’s Data Insights Director, Sally Tindall, says,
“Today’s CPI result re-confirms there will be no cash rate cut in 2024 and puts in doubt the notion we could see one as early as February of next year.
Headline inflation might be well and truly in the RBA’s target band but trimmed mean inflation, which has always been the Board’s preferred measure of inflation, is still too high.
While the RBA puts a lot more weight on the quarterly inflation results, these monthly figures aren’t going to make waves at the RBA’s December meeting.
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The Board has said it needs to see “more than one good quarterly inflation outcome” before cutting the cash rate.
While it’s unclear what exactly constitutes a ‘good’ set of inflation figures, it's hard to see the RBA acting on the next quarterly CPI results alone.
If the RBA is wedded to seeing two more rounds of quarterly inflation data from this point, then May would be the first live meeting - assuming all the data behaves between now and then.
The upshot is, if you’ve got a mortgage, don’t start baking a rate cut into your budget until it hits your bank account.
May might be a possibility for the first cash rate cut, but as we’ve already seen time and time again, the goalposts can move within a blink of an eye.
Instead, use the summer to go and get yourself rate relief that you can actually bank - by either haggling with your current lender or refinancing to one willing to offer you a lower rate.
What can borrowers do now?
While inflation cools and rate cuts remain elusive, homeowners have proven they don’t need to wait for the RBA to find financial relief.
Analysis of RBA data by RateCity.com.au reveals that savvy owner-occupiers have already negotiated or refinanced their way out of the equivalent of three cash rate hikes, saving themselves an average of 0.77 percentage points.
Average owner-occupier variable rate: pre-hikes vs today
| Apr-22 | Sep-24 | Change
(% pts) |
Diff to cash rate rise (% pts) | |
| Av. owner occupier variable rate – all institutions | 2.86% | 6.34% | 3.48% | -0.77% |
| Av. owner-occupier variable rate – big four banks | 2.88% | 6.34% | 3.46% | -0.79% |
| Cash rate | 0.10% | 4.35% | 4.25% |
For the average owner-occupier with a $500,000 mortgage and 25 years remaining, renegotiating their rate could save them around $2,600 in interest over the next year.
| Rate | Potential interest saved next 12 months | |
| Complacent borrower | 7.11% | - |
| Renegotiate to average | 6.34% | $2,598 |
| Play hard ball | 5.99% | $4,346 |
Source: RateCity.com.au. Assumes borrower is an owner-occupier paying principal and interest with a $500,000 debt and 25 years remaining and has not renegotiated their mortgage since the start of the hikes. Assumes mortgage rates change in line with the cash rate forecasts from CBA, that the banks pass the cuts on in full and that the cash rate remains at 3.35 per cent thereafter. Includes $1,250 switching costs.
Those who switch to a competitive lender offering rates under 6% could potentially save $4,300.
How to Maximise Your Savings
- Know your current rate: The average owner-occupier variable rate sits at 6.34%, but many lenders offer rates well below 6%.
- Renegotiate or refinance: Call your lender armed with the knowledge that there are over 40 lenders in the market offering better deals. A 10-minute call could save you thousands.
- Don’t be complacent: If your lender won’t budge, shop around. Switching lenders can involve upfront costs, but the long-term savings can far outweigh these expenses.
