ANZ economists


Mortgage holders are likely to avoid additional strain on their debt following the Reserve Bank of Australia’s (RBA) upcoming board meeting this week, with economists widely predicting a pause in rate hikes.

Australian borrowers are now paying 59 per cent more on their mortgage than they were three years ago – with financial markets now expecting even more rate rises in 2024

The central bank’s board is set to meet over two days starting Monday, reviewing the latest economic data before deciding on the cash rate on Tuesday.

Economic analysts from all four major banks expect the benchmark rate to remain at 4.35 percent, a level maintained for months after a series of aggressive hikes began in 2022 to counter rising inflation.

With the economy growing sluggishly, the labor market gradually easing, and inflation significantly lower than its peak (though still above target), all four major banks foresee the next rate move as a cut.

ANZ diverged from this consensus last week by postponing its forecast for the beginning of rate cuts to February 2025.

Despite high monthly repayments, mortgage holders will need to wait for relief, with the Commonwealth Bank, National Australia Bank, and Westpac predicting rate cuts starting in November.

Recent inflation data, which showed a rise to 3.6 percent in April from 3.5 percent in March, indicates that rate cuts may not occur soon.

ANZ broke ranks last week to push back its forecasted start date for rate cuts until February 2025.

ANZ broke ranks last week to push back its forecasted start date for rate cuts until February 2025.

Gareth Aird, CBA’s head of Australian economics, mentioned that the board should have a “straight-forward decision” ahead of the June meeting, as key economic indicators align with the RBA’s forecasts.

In addition to national accounts, jobs, and inflation data from the March quarter, the RBA board will consider state and federal budgets and the Fair Work Commission’s annual minimum wage decision since its last meeting in May.

Mr. Aird noted that the Fair Work Commission’s 3.75 percent wage increase aligns with the RBA’s expectations for overall wage growth.

Economists are also evaluating the inflationary effects of state and federal budget measures, such as energy bill relief and other cost-of-living initiatives. However, RBA governor Michele Bullock’s recent remarks suggest the bank will disregard the temporary inflation impacts from these measures.

The post-meeting statement and press conference with Ms. Bullock will be closely watched for indications of future interest rate directions and the central bank’s economic outlook.

Recently, the RBA has maintained flexibility regarding rate adjustments, opting not to commit to specific moves. ANZ economists expect this cautious approach to continue but anticipate a focus on a stronger-than-expected consumer sector.

The June meeting will be a key event on the economic calendar, accompanied by a speech from Ellis Connolly, the RBA’s head of payments policy, on Tuesday. Additionally, several economic data releases are expected, including job ads data from ANZ and Indeed on Monday and Judo Bank’s purchasing managers’ indexes on Friday.

In other financial news, stocks on Wall Street fell on Friday after the US Federal Reserve reduced its projected rate cuts from three to one by the end of the year. This ended a four-day streak of record highs, despite gains in technology stocks like Adobe.

The S&P 500 dropped 1.48 points (0.03 percent) to 5,432.26, while the Nasdaq Composite rose 24.20 points (0.14 percent) to 17,688.88. The Dow Jones Industrial Average fell 57.50 points (0.14 percent) to 38,591.49.

Australian futures declined by 17.000 points (0.22 percent) to 19,868.

On Friday, the benchmark S&P/ASX200 index closed 25.4 points (0.33 percent) lower at 7,724.3, losing most of Thursday’s gains. For the week, the ASX200 decreased by 135.7 points (1.73 percent) after gaining 158 points (2.06 percent) the previous week.