The debate about when and if the RBA cuts the cash rate continues to run, with many property spruikers claiming people should buy now before the cuts arrive, because home prices will start to run again, when cuts do arrive. Just don’t mention the extreme unaffordability.
Earlier this month, Australia and New Zealand Bank (ANZ) adjusted its cash rate forecast, saying the RBA will likely cut interest rates by 25 basis points (bps) at its February meeting. Its economists believe that there will be two 25-bp cuts in this cycle (in February and August 2025), taking the cash rate to 3.85 per cent.
However, other market analysts are less sure, pointing to the strong labour market, risks from the low exchange rate, and high Government spending and household support putting pressure on underlying inflation. Then we have the potential fallout form the Trump effect.
My own research as I discussed in my Tuesday live show, indeed shows households are under pressure, and I doubt that small rate cuts, if they arrive, will be sufficient to reverse the damage done to households since rates started to lift in a late and half-hearted attempt by the RBA to crush inflation.
Seems to me we are in no-mans land at the moment. Even if rate cuts do come, they will not be sufficient to rekindle price growth in the eastern states. However, in WA, where growth remain buoyant, it might start increasing again. So it will be important to look at local conditions ahead. Check out my January 2025 data which will be out in a couple of weeks.
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