Hopes for cash rate hold as pressure bites

The latest edition of Finder’s Reserve Bank of Australia (RBA) Cash Rate Survey has found the majority of expert participants expect the central bank to hold the cash rate in February.

This follows months of mounting pressure on Australian homeowners and those grappling with cost of living pressures, as inflation shows signs of slowing after a 0.6 per cent drop in November’s month-on-month Consumer Price Index (CPI) figures.

“Homeowners are still reeling from 13 rate hikes in the last 2 years. Our data shows a staggering 40% struggled to pay their mortgage in December,” Graham Cooke, Head of Consumer Research at Finder, said.

“Even though inflation is falling, I expect the RBA will hold the cash rate for most, if not all of 2024.”

While just over 30 per cent of panellists believe the RBA will announce a rate cut by August this year, almost half (47 per cent) believe cuts from December 2024 onwards are more likely.

“We expect a combination of falling December inflation data, weak December retail sales and a rising trend in unemployment to head off another rate hike in February,” Shane Oliver, Chief Economist at AMP, said.

“By June enough evidence of weak growth and falling inflation will have accumulated to enable the RBA to start cutting rates.”

Data from Finder’s Consumer Sentiment Tracker and the Reserve Bank of Australia (RBA) has also found that Australian households experienced an “extreme” level of cost of living pressure in December 2023, up one point from the previous month.

Respondents reported declining savings balances, record high credit card spending ($34.6 billion), and extreme stress over finances and housing costs.

Another Finder survey found three per cent of respondents have had to use credit cards to pay for their mortgage, four per cent have taken out personal loans to cope with rising costs, five per cent are renting out a spare room, four per cent have moved in with a friend to share mortgage costs, 14 per cent have reduced their buy now pay later (BNPL) spending and 12 per cent have cut back their credit card spending.

“The threat to livelihoods is significant and many people are having to make some tough calls to get by,” Cooke said.

“As we wait for interest rates to drop – people are taking matters into their own hands.

“If you haven’t reviewed your financial arrangements in the past 12 months, you could probably be getting a better deal.”