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Monthly inflation ticking along – in the wrong direction - featured image
By Brett Warren

Monthly inflation ticking along – in the wrong direction

The prospect of cash rate cuts in 2024 remains in doubt following higher than expected inflation figures released today from the ABS.

The monthly CPI indicator shows annual inflation rose 3.6 per cent in the 12 months to April 2024, the highest annual rate since November of last year and up for the second month in a row and is now sitting at 3.6 per cent,

However, looking at the annual rate, excluding volatile items and holiday travel, the monthly indicator held steady from the previous month at 4.1 per cent.

All Groups Monthly Cpi Indicator, Annual Movement (%)

Source: ABS monthly CPI indicator

Monthly Consumer Price Index Indicator, Australia - annual movement since peak

Monthly CPI Ex. volatile items + holiday
Dec-22 8.4% 7.2%
Jan-23 7.5% 6.9%
Feb-23 6.8% 6.8%
Mar-23 6.3% 6.9%
Apr-23 6.7% 6.5%
May-23 5.5% 6.4%
Jun-23 5.4% 6.1%
Jul-23 4.9% 5.8%
Aug-23 5.2% 5.5%
Sep-23 5.6% 5.5%
Oct-23 4.9% 5.1%
Nov-23 4.3% 4.8%
Dec-23 3.4% 4.2%
Jan-24 3.4% 4.1%
Feb-24 3.4% 3.9%
Mar-24 3.5% 4.1%
April 24 3.6% 4.1%

Source: ABS Consumer Price Index indicator

Big four bank forecasts remain unchanged

All four big bank economic teams have kept their forecasts the same on the back of today’s monthly ABS data, with each team expecting the first RBA cut to come in November.

That said, ANZ has again acknowledged it could be later.

Current big four bank cash rate forecasts

May RBA meeting Forecasted next RBA move Total 0.25%-pt cuts in 2024 Total 0.25%-pt cuts in 2025
CBA Hold at 4.35% - 0.25% pts in Nov-24 1 4
Westpac Hold at 4.35% - 0.25% pts in Nov-24 1 4
NAB Hold at 4.35% - 0.25% pts in Nov-24 1 4
ANZ Hold at 4.35% - 0.25% pts in Nov-24 1 2

Source: Forecasts current as of 29/05/2024 research director, Sally Tindall, said:

“The RBA isn’t going to hike rates on the back of this data, but it won’t be entertaining the prospect of rate cuts any time soon either.”

The central bank is likely to be in a prolonged ‘wait-and-see’ period.

While the RBA will not put excess weight on one month’s worth of data, looking back since the start of the year, Australia’s progress in the battle against high inflation has the wobbles.

The RBA will need to see this swing right around before it’s going to formally entertain the possibility of cash rate cuts.

If you’ve got a mortgage, understand your rate isn’t moving any time soon unless you do something about it.

The launch of CBA’s new digital home loan, which is exclusive to refinancers, is fresh evidence banks are ready and willing to plate up lower rates if they can secure your business. Use this to your advantage.

The stage three tax cuts coming in July will provide welcome relief to households squarely in the red, but if you’ve managed to balance the budget since the start of the hikes, consider putting that money in the mortgage.

Not only will it build up your financial buffer, it can help reduce the pain of higher rates,” she said.

Cost of a $500,000 home loan for the remainder of the year - assuming no RBA rate changes

Based on principal & interest payments with 25 years remaining

Owner-occupier Rate Current monthly repayments Interest bill - rest of year (June - Dec incl) Difference to complacent borrower
Complacent borrower 7.11% $3,569 $20,661
Average borrower 6.39% $3,342 $18,561 -$2,100
Sharp borrower 5.99% $3,218 $17,394 -$3,267

Source: Notes: based on an owner-occupier paying principal and interest with 25 years remaining. Does not include RBA rate changes or fees.

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.
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