RBA rate cuts: warning of ‘nightmare scenario’ ahead – realestate.com.au

Australians hoping for cheaper mortgages will have to wait even longer, with rate cuts unlikely over the next six months as the Reserve Bank turns up the heat amid resurgent inflation and rising energy bills.

After the sharpest quarterly rise in the CPI since March 2023, and with energy discounts easing, Compare the Market economics director David Koch warns that the lull could continue well into next year – and a surprise rise in the first half cannot be ruled out.

This is despite the fact that at least two major banks still indicate that a rate cut is planned in February or May.

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“If inflation keeps coming in like this, we may not see any cuts at all,” Koch said.

“The nightmare scenario is that this is the first sign that inflation is starting to rise again. If that is the case, we could even see the Reserve Bank raising cash rates in the first half of next year.

“We have all been advised by many economists that we could see two or three more rate cuts in the coming months. I think the idea of ​​further rate cuts in the next six nine months is now being seriously questioned.

“My assessment is that we won’t see interest rates rise for at least another six months unless the December inflation rate, which will be released at the end of February, shows a dramatic improvement.”

Mr Koch added that continued price increases should serve as a reality check for governments to realign their policies.

“Just talking to people, you get the sense that the cost of living is going up and inflation is bouncing back up,” he said.

“Compare the market’s Household Budget Barometer: 93 percent of people believe there is no easing in the cost of living.

“Energy cuts kept that inflation rate artificially low. Now that they have leveled off, we are seeing the energy price increases take full effect – and that hurts.”

TV presenter and Compare the Market economics director David Koch says homeowners could wait another six months for another rate cut.

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As for homeowners who want an interest rate reduction, Koch says they are better off arranging a reduction themselves.

“If you wait for the Reserve Bank to move, you could be waiting a long time – and that means missing out on potential savings in the meantime,” he said.

“Look at what rates are leading the market. If your bank can’t match them, it might be time to switch.”