44% of Economists Predict First Rate Cut by February 2025
In the latest Finder RBA Cash Rate Survey™, 42 economists and experts provided insights on future cash rate movements and the overall economic landscape.
All surveyed experts (100%, 42/42) anticipate that the Reserve Bank of Australia (RBA) will maintain the cash rate at 4.35% in September.
A significant majority of the panelists (68%, 23/34) expect the first rate cut to occur within the first three meetings of 2025. Notably, 44% (15/34) predict that this initial cut will take place in February 2025.
Graham Cooke, head of consumer research at Finder, highlighted that homeowners are anxiously awaiting a reduction in rates. "Many are hopeful that relief will come sooner rather than later, as the prolonged period of high rates has kept Finder's Cost of Living Pressure Gauge in the extreme range for over two years."
He also noted the recent 50 basis point cut by the US Federal Reserve, which increases the likelihood of an RBA cut this year, potentially in November.
Geoffrey Kingston from Macquarie University Business School remarked on the mixed signals from the economy. "On one hand, inflation remains excessively high due to substantial public-sector spending. On the other hand, the private sector continues to weaken."
James Morley from The University of Sydney stated that the RBA is unlikely to lower rates until 2025 unless there are significant changes in inflation and economic forecasts.
Risk of Recession in Australia
The expert panel assessed a 39% likelihood of Australia entering a recession within the next year. Alarmingly, 34% (10/29) believe there is over a 50% chance of a recession occurring.
Stella Huangfu from the University of Sydney warned of recession risks, citing high interest rates, global economic uncertainty, weak consumer confidence, and a slowdown in the labor market. Jakob Madsen from UWA echoed these concerns, stating, "Australia, like many other countries, is facing bubbles in stock, housing, and credit markets, with low investment levels."
Conversely, Tim Reardon from the Housing Industry Association argued that the likelihood of a recession is not higher than usual, attributing strong population growth and tight labor markets as factors offsetting economic headwinds.
David Robertson from Bendigo Bank noted that while Australia has experienced a per-capita recession, a hard-landing 'technical recession' seems unlikely as household incomes are recovering due to tax cuts and moderating inflation.
Housing Market Outlook
Experts predict modest growth in average house and unit prices across all capital cities, with an overall forecasted increase of 2.1%. Perth is expected to see the most significant rise at 5.2%, raising the average minimum income required for a house to $154,910 and $103,966 for a unit.
Canberra is projected to experience a 3.7% price increase, necessitating an average minimum income of $194,746 for a house and $122,997 for a unit. Brisbane and Adelaide are both expected to see price rises of 2.9%.
Expert Opinions
Several experts weighed in on the current economic situation:
- Dr. Andrew Wilson, My Housing Market: "Inflation is still well above the RBA target, and the labor market remains strong."
- Tomasz Wozniak, University of Melbourne: "We're over it! ... and we're going down soon!"
- Aarti Singh, University of Sydney: "The RBA is likely to wait rather than change the rate to balance risks."
- Alex Joiner, IFM Investors: "The RBA will take time to be confident in inflation before supporting the economy."
- Evgenia Dechter, UNSW: "The RBA is likely to hold the cash rate until more information is available."
In conclusion, while the RBA is expected to maintain the current cash rate for now, experts foresee potential cuts beginning in early 2025, contingent on inflation trends and economic conditions. Homeowners and potential buyers should prepare for a challenging economic environment ahead.