Potential interest rate cuts by the Reserve Bank of Australia (RBA) remains a hot topic as Australia’s central bank tries to achieve a lower inflation rate while minimising the impact on the economy and employment.
The RBA commenced increasing interest rates in May 2022 to slow inflation.
Higher interest rates have slowed Australia’s economy which economic growth now estimated to be running at around 0.2% in the March quarter of 2024 and 1.2%. on year-ended growth basis.
The unemployment rate has increased but remains at relatively low levels.
However, the unemployment rate is expected to edge higher given trends in various forward labour market indicators (such as job advertisements and vacancies).
The RBA is also looking at consumer sentiment which has declined due to higher interest rates and inflation.
On a positive note, even though inflation currently remains just above the RBA’s target range of 2-3%, considerable progress has been made over the last year in reducing inflation.
Some commentators suggest that the RBA is likely to cut interest rates later in the year although considerable uncertainty remains, especially, around the timing and scale of future interest rate cuts.
Uncertainty and inflation risks are being driven by heightened geopolitical conflicts and global supply chain disruptions.
Property investors should monitor economic trends closely, considering the implications for interest rates and inflation and, therefore, also future property market dynamics.
Importantly, with most commentators expecting the RBA’s next interest rate move to be down, investors should be now thinking about proactive strategies that capitalise on current and emerging opportunities in the property market while successfully navigating challenges.
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Source: Various including Oli, RBA, CBA, NAB, ANZ, and Macquarie.
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