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| Indebted homeowners cry out for relief but RBA won’t be rushed as key inflation data looms | Indebted homeowners cry out for relief but RBA won’t be rushed as key inflation data looms |
| (about 7 hours later) | |
| CPI figures released on Wednesday will determine whether millions of mortgaged Australians will get a rate cut next month, economists say | CPI figures released on Wednesday will determine whether millions of mortgaged Australians will get a rate cut next month, economists say |
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| Consumer price figures released on Wednesday will determine whether a cautious Reserve Bank of Australia will give millions of mortgaged Australians a rate cut next month, economists say. | Consumer price figures released on Wednesday will determine whether a cautious Reserve Bank of Australia will give millions of mortgaged Australians a rate cut next month, economists say. |
| The RBA board earlier this month shocked the market and experts when, in a split decision, it decided to hold its key cash rate at 3.85%, defying near-unanimous predictions of a move to lower it. | The RBA board earlier this month shocked the market and experts when, in a split decision, it decided to hold its key cash rate at 3.85%, defying near-unanimous predictions of a move to lower it. |
| Two weeks away from the board’s next meeting on 11-12 August, slightly chastened investors and analysts are once again assuming a rate cut is a done deal – with only one caveat. | Two weeks away from the board’s next meeting on 11-12 August, slightly chastened investors and analysts are once again assuming a rate cut is a done deal – with only one caveat. |
| “Unless this [week’s inflation report] is a surprise … then almost certainly we will get a rate cut,” said Jonathan Kearns, chief economist at investment firm Challenger and a former senior RBA official. | “Unless this [week’s inflation report] is a surprise … then almost certainly we will get a rate cut,” said Jonathan Kearns, chief economist at investment firm Challenger and a former senior RBA official. |
| The message from ANZ’s head of Australian economics, Adam Boyton, was the same: a high consumer price number could “derail an August rate cut”. | The message from ANZ’s head of Australian economics, Adam Boyton, was the same: a high consumer price number could “derail an August rate cut”. |
| Based on consensus forecasts and assuming no surprises, the Australian Bureau of Statistics’s consumer price report will show the annual pace of inflation dropping to 2.2%, from 2.4% in March. | Based on consensus forecasts and assuming no surprises, the Australian Bureau of Statistics’s consumer price report will show the annual pace of inflation dropping to 2.2%, from 2.4% in March. |
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| Which begs a broader question: If inflation is already below the mid-point of the central bank’s 2% to 3% target range – and if the RBA believes monetary policy is slowing the economy – then why are we even still in this “will-they-won’t-they” discussion? | Which begs a broader question: If inflation is already below the mid-point of the central bank’s 2% to 3% target range – and if the RBA believes monetary policy is slowing the economy – then why are we even still in this “will-they-won’t-they” discussion? |
| The Australian Bureau of Statistics’s consumer price report will show inflation eased further to 2.2% in the year to June, from 2.4% in June, according to the median analyst forecast. Inflation has dropped in almost every quarter since it peaked at 7.8% at the end of 2022. | The Australian Bureau of Statistics’s consumer price report will show inflation eased further to 2.2% in the year to June, from 2.4% in June, according to the median analyst forecast. Inflation has dropped in almost every quarter since it peaked at 7.8% at the end of 2022. |
| It’s no surprise then that the message from Michele Bullock, the central bank’s governor, is that interest rates are on the way down. | It’s no surprise then that the message from Michele Bullock, the central bank’s governor, is that interest rates are on the way down. |
| But as much as indebted homeowners are crying out for the relief rate cuts bring, the message is also that the RBA will not be rushed. | But as much as indebted homeowners are crying out for the relief rate cuts bring, the message is also that the RBA will not be rushed. |
| In deciding to hold rates at the last meeting, the majority of board members decided there was merit in “waiting for a little more information to confirm that inflation remains on track to be at 2.5% on a sustainable basis”. | In deciding to hold rates at the last meeting, the majority of board members decided there was merit in “waiting for a little more information to confirm that inflation remains on track to be at 2.5% on a sustainable basis”. |
| Monthly price figures, which offer only a partial picture, suggested there were still some lingering worries inflation was not dropping as quickly as hoped, Bullock has said. | Monthly price figures, which offer only a partial picture, suggested there were still some lingering worries inflation was not dropping as quickly as hoped, Bullock has said. |
| There are also the ongoing worries that Donald Trump will announce a major new escalation in his trade aggression. And the fact that billions of dollars in taxpayer-funded subsidies have provided an artificial tailwind in the race to bring inflation back under control. | There are also the ongoing worries that Donald Trump will announce a major new escalation in his trade aggression. And the fact that billions of dollars in taxpayer-funded subsidies have provided an artificial tailwind in the race to bring inflation back under control. |
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| Household electricity bills, for example, would be 26% higher today were it not for temporary rebates from federal and state governments. | Household electricity bills, for example, would be 26% higher today were it not for temporary rebates from federal and state governments. |
| As these handouts end, inflation will drift back towards 3% by the end of the year, according to the RBA’s May forecasts, and then it will take 18 months to get back to 2.6%. | As these handouts end, inflation will drift back towards 3% by the end of the year, according to the RBA’s May forecasts, and then it will take 18 months to get back to 2.6%. |
| As is its usual practice, the central bank focuses on an underlying measure of inflation that strips out more volatile price movements, such as for electricity and petrol, to get a clearer picture. Using a “trimmed mean” measure rather than the “headline” rate, inflation has only just returned to the target band, at 2.9% in the year to March. | As is its usual practice, the central bank focuses on an underlying measure of inflation that strips out more volatile price movements, such as for electricity and petrol, to get a clearer picture. Using a “trimmed mean” measure rather than the “headline” rate, inflation has only just returned to the target band, at 2.9% in the year to March. |
| It is this core inflation rate that economists will be focused on come Wednesday at 11:30am. | It is this core inflation rate that economists will be focused on come Wednesday at 11:30am. |
| Kearns said a “surprise” result would be consumer prices rising “materially” faster than the anticipated 0.7% increase in the underlying figure in the three months to June. A rise of 0.9% – which would push the annual rate to 3% – or more “would certainly” give the RBA board pause for thought, he said. | Kearns said a “surprise” result would be consumer prices rising “materially” faster than the anticipated 0.7% increase in the underlying figure in the three months to June. A rise of 0.9% – which would push the annual rate to 3% – or more “would certainly” give the RBA board pause for thought, he said. |
| Boyton said he expected the quarterly underlying inflation figure would come in at 0.6%, or 2.7% year-on-year. | Boyton said he expected the quarterly underlying inflation figure would come in at 0.6%, or 2.7% year-on-year. |
| That said, even a 0.8% quarterly increase would “present a challenge for the board”. | That said, even a 0.8% quarterly increase would “present a challenge for the board”. |