Mortgage holders can anticipate the initial of several interest rate reductions when the Reserve Bank of Australia (RBA) convenes next week. According to fresh research, a significant 90% of experts surveyed by Finder predict that RBA Governor Michelle Bullock will announce a 25-basis-point cut to the current cash rate of 4.1% on Tuesday.
The majority of economists are optimistic about further cuts, with three-quarters of the 41 specialists in the survey anticipating two or more reductions within the next year. Many believe these adjustments could occur as early as July and August, driven by a recent drop in inflation rates back within the RBA’s target range of 2% to 3%.
The positives do not stop there; analysts attributed this hopeful outlook to ongoing sluggish growth in the Australian economy and declining consumer spending, exacerbated by global uncertainties, particularly those stemming from US tariffs. Moreover, steady unemployment figures, with a jobless rate of 4.1% recorded in April, align with economists’ predictions, reinforcing their expectations for rate cuts.
Earlier this year, the RBA executed its first official rate cut in nearly five years. Graham Cooke, head of research at Finder, forecasts additional reductions soon, speculating that by Christmas, the cash rate could approach 3%. He emphasises that maintaining consistent repayments on loans can substantially reduce the principle and overall interest paid over time.
Among those supporting the expected rate cut next week is David Robertson from Bendigo Bank, who sees a 0.25% reduction as probable. However, he expresses a desire for more substantial decreases, suggesting a larger cut of up to 35 basis points might be preferable. While the consensus leans towards a reduction, a minority of survey respondents are more conservative, projecting that the RBA may decide to keep rates steady. Malcolm Wood of Ord Minnett notes that a tight labour market is causing higher wage growth, which might keep labour costs above the RBA’s inflation targets.
Moreover, despite the Albanese government’s ambitious goal to construct 1.2 million new homes by 2029 post a decisive election win, there remains scepticism. One in five experts doubt that reaching this target would significantly enhance housing affordability.
In summary, the prevailing sentiment among economists is one of cautious optimism; the RBA is likely to initiate a series of interest rate cuts, providing relief for mortgage holders amidst an economy characterised by sluggish growth and stable employment figures.