Economist's prediction for the cash rate in 2024

Bendigo Bank chief economist David Robertson warns an interest rate cut is unlikely in 2024.

Transcript

00:00The latest GDP data showed further evidence that the domestic economy continued to decelerate

00:05in the first quarter due to inflated costs, rising tax payments and restrictive interest

00:10rates, although some relief is expected on all those fronts in the new financial year.

00:16Real GDP only rose 0.1% in Q1 and annual growth slowed to just 1.1%, the lowest year-on-year

00:23pace since 2020, while GDP per capita remained negative for the fifth consecutive quarter.

00:30Growth isn't expected to rebound in the second quarter, but from July the Stage 3 tax cuts will

00:35start to support household incomes, and by the end of 2024 inflation should be closer to 3%,

00:42a level we haven't seen since 2021, which will be less of a drag on the economy.

00:47As for rate cuts to support demand, the RBA will need to be convinced that the underlying problem

00:52we have, high inflation, is fully contained, and the latest monthly CPI indicator didn't

00:59help that perception. Both headline CPI and core inflation rose marginally in the April data,

01:05to 3.6 and 4.1%, and while this monthly indicator isn't as important as the quarterly numbers due

01:12in late July, this uptick, together with the uncertainty of the impact of state and federal

01:17budgets, adds to a rates-on-hold outlook. Similarly, uncertainty around how much of

01:23the tax cuts will be saved versus spent doesn't appear consistent with further RBA hikes,

01:29so our long-held view that the RBA will start cutting rates early next year remains unchanged.

01:36Other advanced economies have also seen stubborn inflation.