Finder’s RBA Survey: 44% of experts expect first rate cut in February
Stretched homeowners will have to wait until next year for mortgage relief, according to experts in Finder's latest cash rate poll.
In this month's Finder RBA Cash Rate Survey™, 42 experts and economists weighed in on future cash rate moves and other issues relating to the state of the economy.
All experts (100%, 42/42) believe the RBA will hold the cash rate at 4.35% in September.
The majority of panellists who weighed in* (68%, 23/34) expect to see the first rate cut in the first three meetings of next year.
Almost half (44%, 15/34) predict the first cut will come in February 2025.
Graham Cooke, head of consumer research at Finder, said homeowners are eagerly awaiting a rate cut.
"Many are hopeful that relief will come sooner rather than later, as the extended period of high rates has kept Finder's Cost of Living Pressure Gauge in the extreme range for over two years.
"We've now seen the US Federal Reserve lower American interest rates by a huge 50 basis points. This makes it far more likely that we will see an RBA cut this year, likely in November."
Geoffrey Kingston from Macquarie University Business School said it has been another month of mixed signals.
"On the one hand, inflation remained too high, propped up by high public-sector spending. On the other hand, the private sector continued to weaken," Kingston said.
James Morley from The University of Sydney said the RBA has made it clear that they are unlikely to cut rates until 2025 unless there is a material change to their forecasts of inflation and economic conditions.
Australia could fall into a recession in the next year
The panel of experts say there is a 39% chance of Australia experiencing a recession in the next 12 months.
Worryingly, 1 in 3 (34%, 10/29) think there is a higher than 50% chance of a recession in the next year.
Stella Huangfu from University of Sydney warned of a potential recession, citing high interest rates, global economy uncertainty, weak consumer confidence, and a labour market slowdown.
Jakob Madsen from UWA said the economy is severely out of equilibrium.
"Australia (like many other countries) has bubbles in stock, housing and credit markets and investment is low, so I cannot see how it can continue," Madsen said.
Tim Reardon from Housing Industry Association said the likelihood of a recession in Australia is no higher than usual.
"Strong population growth and tight labour markets [are] helping to offset the headwinds working in the opposite direction," Reardon said.
David Robertson from Bendigo Bank said Australia has experienced a per-capita recession, but a hard-landing 'technical recession' ahead appears unlikely as household incomes recover, thanks to tax cuts, moderating inflation and (then) rate cuts next year.
Cooke said while Australia has technically avoided a recession, many people are experiencing economic hardship.
"Soaring living costs, coupled with stagnant wages and a high cash rate, have created a challenging financial environment for many households.
"The best way to safeguard your finances is to prioritise paying off high-interest debts and explore ways to increase your savings."
Average house and unit prices tipped to rise by just 2.1%
Panellists expect to see low growth to average house and unit prices across all capital cities except for Perth.
The weighted average growth rate across the capital cities is forecasted to be 2.1%.
Perth is projected to see the biggest rise, with an average change of 5.2%. This would bring the average minimum income required for a house to $154,910, and $103,966 for a unit.
Canberra is forecasted to see a price rise of 3.7% which would see prospective buyers needing 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%, bringing the average minimum income to $182,060 and $160,675 for a house respectively. For units, the minimum income required would be $123,069 and $109,829 respectively.
Minimum household income required to afford a house
| City | Average change | Median house price (last 3 months) | Minimum income required now | Minimum income required taking into account panel forecast |
|---|---|---|---|---|
| Sydney | 3% | $1,425,000 | $281,657 | $288,980 |
| Canberra | 4% | $950,000 | $187,772 | $194,746 |
| Brisbane | 3% | $895,000 | $176,901 | $182,060 |
| Melbourne | 2% | $885,000 | $174,924 | $177,723 |
| Adelaide | 3% | $790,000 | $156,147 | $160,675 |
| Perth | 5% | $745,000 | $147,252 | $154,910 |
| Hobart | 1% | $665,800 | $131,598 | $133,102 |
| Darwin | 2% | $592,000 | $117,011 | $119,482 |
| Australian average | 2% | $982,258 | $194,148 | $198,322 |
| Source: Finder analysis of CoreLogic data. Calculations are based on the average variable home loan interest rate, a 80% loan to value ratio with a 20% deposit, and 30% of gross income as the threshold for mortgage stress. |
Minimum household income required to afford a unit
| City | Average change | Median unit price (last 3 months) | Minimum income required now | Minimum income required taking into account panel forecast |
|---|---|---|---|---|
| Sydney | 3% | $780,000 | $154,170 | $158,179 |
| Melbourne | 2% | $620,000 | $122,546 | $124,506 |
| Brisbane | 3% | $605,000 | $119,581 | $123,069 |
| Canberra | 4% | $600,000 | $118,593 | $122,997 |
| Hobart | 1% | $540,000 | $106,733 | $107,953 |
| Adelaide | 3% | $540,000 | $106,733 | $109,829 |
| Perth | 5% | $500,000 | $98,827 | $103,966 |
| Darwin | 2% | $367,500 | $72,638 | $74,171 |
| Australian average | 2% | $663,678 | $131,179 | $133,999 |
| Source: Finder analysis of CoreLogic data. Calculations are based on the average variable home loan interest rate, a 80% loan to value ratio with a 20% deposit, and 30% of gross income as the threshold for mortgage stress. |
*Experts are not required to answer every question in the survey
Here's what our experts had to say:
Dr Andrew Wilson, My Housing Market (Hold): "Inflation still well above RBA target and labour market remains strong."
Tomasz Wozniak, University of Melbourne (Hold): "We're over it! ... and we're going down soon! My forecasts are centred at HOLD for this month. We have just passed the times of a high probability of RAISE as it went down from over 70 per cent in July to less than 50 per cent for the upcoming meeting. For the first time, my forecasts indicate a decisive CUT for December, as the predictive interval for that month does not include the current cash rate level. You can access these forecasts at https://forecasting-cash-rate.github.io/."
Aarti Singh, University of Sydney (Hold): "As the inflation has been coming down, although slowly, the RBA is still likely to wait rather than change the rate to balance both risks, risks to inflation and the labour market."
Alex Joiner, IFM Investors (Hold): "The RBA has noted that the data doesn't justify easing policy this year, specifically inflation remains uncomfortably high. We expect that it will take further time for the RBA to be confident in inflation and once it has that it will look to support the economy and labour market."
Malcolm Wood, Ord Minnett (Hold): "Sticky inflation in domestic services."
Nalini Prasad, UNSW Sydney (Hold): "I think the RBA will hold interest rates steady. Inflation has fallen and is expected to reach the top of the target by the end of the year. Barring any large shocks to the economy I think the RBA will want to wait and see if inflation returns to target."
Evgenia Dechter, UNSW (Hold): "Recent growth, unemployment and other indicators suggest a continued economic slowdown. The latest monthly CPI shows a slight decline but inflation remains above the RBA's target. With limited new inflation data since the last meeting, the RBA is likely to hold the cash rate until more information becomes available."
Mark Crosby, Monash University (Hold): "Economy now showing signs of weakness, but RBA likely to wait for further falls in inflation before first cut late this year or first meeting in 2025."
Mala Raghavan, University of Tasmania (Hold): "Inflation (July figure: around 3.5%) is still above the target range of 2 to 3 %, while economic growth is sluggish (1.1% growth). Despite the slowdown in the Australian GDP growth rate, the Australian economy has so far avoided the classical recession. Though the per capita income growth is negative, the unemployment rate is within the acceptable level, and the wage growth rate is keeping pace with inflation. These indicators suggest that the RBA is likely to maintain the cash rate."
Peter Munckton, Bank of Queensland (Hold): "Both inflation and the unemployment rate are around 4%. GDP growth is flattish, and the global economy is sub-par. That combination should see the RBA keep the cash rate unchanged at 4.35% at the September meeting."
Brodie Haupt, WLTH (Hold): "RBA continues to report higher underlying inflation so it seems unlikely there will be a cut at this point in time."
Anthony Waldron, Mortgage Choice (Hold): "The latest data makes the case for the Reserve Bank to keep the cash rate on hold. ABS data showed that inflation is trending down, and the seasonally adjusted unemployment rate rose slightly in July. Data also points to interest rates affecting the economy as intended, with the ABS Australian National Accounts showing that outside of the pandemic, the economy recorded the slowest annual financial year economic growth since FY92."
Matthew Greenwood-Nimmo, University of Melbourne (Hold): "I think the RBA will hold the cash rate constant to maintain downward pressure on inflation. There are downside risks that the RBA will be monitoring carefully but I don't think those risks merit a rate cut at this stage."
Geoffrey Kingston, Macquarie University Business School (Hold): "Another month of mixed signals. On the one hand, inflation remained too high, propped up by high public-sector spending. On the other hand, the private sector continued to weaken. Bank is almost certain to remain in a holding pattern."
Stella Huangfu, University of Sydney (Hold): "Inflation is currently at 3.8%, which remains well above the RBA's target range. Consequently, interest rates need to remain high to help curb spending. Unless Australia experiences a significant recession before the end of this year, the RBA is likely to keep interest rates on hold at least until February next year."
Garry Barrett, University of Sydney (Hold): "Core inflation remains persistently outside target range."
Nicholas Frappell, ABC Refinery (Hold): "Inflation remains above target while so far other measures of strength remain relatively steady."
James Morley, The University of Sydney (Hold): "The RBA has made it clear that they are unlikely to cut rates until 2025 unless there is a material change to their forecasts of inflation and economic conditions. I anticipate that more favourable progress on headline inflation for Q3 beyond the temporary effects of energy rebates and heightened worries about global economic conditions, especially related to China, but also with decreasing interest rates for many other countries, will motivate the RBA to start cutting in December of this year. However, they are not likely to cut more than three or four times unless conditions deteriorate much more rapidly than expected, such as a sudden spike in the unemployment rate. The limited number of cuts is because the RBA will be waiting to see the effects of these initial cuts to determine where the neutral level of interest rates is. Given likely ongoing weak productivity growth, I suspect neutral is a bit lower than the RBA might be currently expecting, so there could be a few further cuts later in 2025."
Devika Shivadekar, RSM Australia (Hold): "Current economic conditions justify a watchful hold therefore we see cautious non-action at the Sept meeting. Following RBA officials' comments, it is clear the RBA is in no rush to ease policy rates. Unless data in the upcoming months forces RBA's hand to act sooner, a pivot is most likely expected in 1Q25."
Craig Emerson, Emerson Economics (Hold): "The economy is barely growing and would not have grown in the last two quarters if not for government spending."
Leanne Pilkington, Laing+Simmons (Hold): "Recession is now a real possibility and it has become clear that the rate rise cycle has had a significant impact on dampening household expenditure. Inflation may not yet be within the target range but it is heading in that direction, and other economic variables point to the next rate movement being down."
Shane Oliver, AMP (Hold): "Short of substantially higher unemployment, lower underlying inflation or a financial shock the RBA is likely to remain on hold in the next few months as it still sees too much excess demand and inflation. But easing demand, employment and inflation are likely to drive rate cuts from February."
Nicholas Gruen, Lateral Economics (Hold): "I'm guessing – like everyone else :) It's very hard to know."
Tim Nelson, Griffith University (Hold): "RBA intends to hold rates until inflation is well under control."
Tim Reardon, Housing Industry Association (Hold): "Inflation is still above target. There are still a number of factors that could keep inflation elevated, e.g. low unemployment, strong population growth, rent and electricity prices could continue putting upward pressure on inflation, government spending and infrastructure projects could continue supporting wage growth. Notwithstanding the potential for a major national/international shock in the opposite direction, the RBA is not yet confident about the trajectory of inflation."
Mathew Tiller, LJ Hooker Group (Hold): "Despite general softness in recent economic data, inflation remains elevated. The RBA will keep rates on hold until they are confident they have beaten inflation."
Saul Eslake, Corinna Economic Advisory Pty Ltd (Hold): "I've had the view since November 2023 that the RBA would leave rates unchanged during 2024, and not start cutting them till February 2025 at the earliest, irrespective of what other central banks did. That's because I concluded, as the RBA has since (beginning with the minutes of the March Board meeting) confirmed, that they had consciously opted to tolerate inflation being above their target band for longer than their peers (the Fed, BoE, BoC and RBNZ) were willing to tolerate inflation being above their respective (and lower) targets, in order to preserve as much as they could of the gains made in reducing unemployment and under-employment during 2021 and 2022. And so having not put interest rates up as much as their peers, inflation hasn't come down as quickly but unemployment hasn't risen as much as in the US, UK, Canada and NZ - so rates won't come down by as soon or as much as in those countries. Especially when you also take into account the fact that Australians, unlike Americans, Brits, Canadians and New Zealanders, are getting tax cuts worth (in terms of their impact on aggregate household cash flows) two 25 basis point rate cuts in the current half year."
Adj Prof Noel Whittaker, QUT (Hold): "Inflation in Australia is still above target (despite Australia having the highest inflation target in the world) and there is no need to stimulate jobs, as unemployment is not high. We have near full employment, evidenced by strong wages growth."
A/Prof Mark Melatos, School of Economics, University of Sydney (Hold): "Inflation remains above the RBA's target band despite moderating in recent months. House prices appear to have significantly decoupled from incomes and shrugged off the rate increases to date. As long as low unemployment (effectively full employment) persists, the cash rate is unlikely to be reduced and further increases remain a possibility."
Jeffrey Sheen, Macquarie Business School (Hold): "Almost all other major central banks have begun easing their monetary policy. We cannot afford the resulting strong exchange rate at this stage.The weakness in Australia's exports to China means our luck has run out. Business investment and consumption are already feeble. By November, I expect the portents of a severe recession in 2025 will compel the RBA to walk back its anti-inflation commentary and begin cutting the cash rate. If they don't, they risk damaging the economy as well as their hard-earned reputation as effective macroeconomic managers."
Dale Gillham, Wealth Within (Hold): "CPI is still a little high and is not showing signs of moving into where the RBA would like it."
Kyle Rodda, Capital.com (Hold): "The RBA is sticking to its hold and hope strategy. Given very little guidance about a potential hike and the push back from the central bank about future cuts, there's little reason to think there'll be a surprise rate rise."
David Robertson, Bendigo Bank (Hold): "Monetary policy is firmly on hold although the RBA should be in a position to start cutting official rates in early to mid 2025. Other central banks are now steadily reducing rates, but our cycle appears to be around 6-9 months later."
Stephen Halmarick, Commonwealth Bank (Hold): "Global trends, inflation heading towards target and rising unemployment rate."
Stephen Miller, GSFM (Hold): "Inflation is still too "sticky" to cut the policy rate now but should abate sufficiently in the wake of tepid activity growth to allow easing by February."
Matt Turner, GSC Finance Solutions (Hold): "My view is that the RBA will need to see inflation continue to fall into the target band, they have indicated strongly that there have still been conversations in regard to increasing rates rather than decreasing. Soft GDP and employment data helps mount a case for a cut, however until inflation returns to the target band, I don't see there being any discussions on a reduction to the cash rate."
Peter Boehm, Pathfinder Consulting (Hold): "As I have said for some time now, The Federal Government's fiscal policy has helped fuel inflation such that I cannot see rates reducing anytime soon. In fact, I suspect there is a real possibility rates will rise this year if the inflation rate remains where it is today. Whilst the federal government and RBA should act independently they need to act cooperatively. This is not happening, largely because of the government's obsession with spending, as a means to help prop up GDP. Their approach fails to recognise per capita GDP is actually falling, meaning every Australian is worse off. The government's response (like providing one-off energy rebates) is like trying to hold the ocean back with a bucket - it just won't work."
Jakob Madsen, UWA (Hold): "Inflation is still a concern."
Michael Yardney, Metropole Property Strategists Pty Ltd (Hold): "The Reserve Bank of Australia maintains that its number one enemy is inflation and even though inflation is slowly falling, it's not falling as quickly as the RBA had hoped. With our economy slowing and many households on the edge of mortgage stress, more rate rises in 2024 are off the cards. If the economy evolves broadly as anticipated, the board does not expect that it will be in a position to cut rates in the near term, so early next year is when rates are likely to start falling."
Cameron Murray, Fresh Economic Thinking (Hold): "Since COVID the Australian economy seems to be about 12-18 months the major economic trends in other countries."
Stephen Koukoulas, Market Economics (Hold): "Weak economy, low inflation."
Richard Holden, UNSW (Hold): "Core inflation is stuck at 4 percent or above."
