Any relief for household borrowers in the form of rate cuts remains a distant prospect, with experts warning that rates won’t fall until 2025.
ANZ’s head of Australian economics Adam Boyton said household consumption is firmer than expected, continued resilience in the labor market and continued inflation The interest rate cuts would be postponed until February next year.
‘It is not that monetary policy is not working. It is,” Mr. Boyton wrote in a note to customers.
‘The economy has clearly slowed down, especially in terms of private final demand. For this reason, we consider an interest rate increase unlikely.
‘However, it will probably take a little longer than expected to find a good balance between supply and demand.’
ANZ’s head of Australian economics Adam Boyton has predicted interest rates will not fall until early 2025 (Photo: Members of the public walk past ANZ Bank in Sydney)
RBA Governor Michele Bullock (pictured) told a Senate hearing last week that a rebound in inflation could force the bank to raise rates again
While ANZ economists maintained their forecasts for two follow-up rate cuts after February, the country warned that risks to that projection were tilted to the downside, with cuts worth 50 basis points more likely than four cuts worth 100 basis points.
Investors are more pessimistic about the timing of the rate cuts, now that money markets have fully priced in a 25 basis point easing in July next year.
Economists and analysts are also closely watching the release of new US inflation data on Wednesday and a meeting of the US central bank, the Federal Reserve, on Thursday (AEST), looking for clues about the path of rate cuts abroad.
After job growth continued to surprise last month and underlined the continued resilience of the US economy in the face of persistent inflation and high borrowing costs, the Fed is widely expected to leave rates unchanged.
Fed officials will also submit new rate forecasts, which are expected to show that a majority of members now see two rate cuts by the end of the year, instead of the three cuts predicted by a narrow majority at a meeting in March.
Any relief for households in the form of rate cuts remains a distant prospect, with experts warning that rates won’t fall until 2025 (stock image)
As mortgage stress increases due to cost-of-living pressures and high interest rate levels, the lion’s share of household borrowers are meeting their loan repayments, according to the Australian Council of Financial Regulators.
The council, which coordinates the management of Australia’s financial system and is chaired by RBA Governor Michele Bullock, warned on Tuesday that while most borrowers had dealt with the rate hike, the proportion of mortgage lenders in arrears had risen.
“While fiscal pressures from inflation and interest rates are still widely felt and many households are adjusting their finances, most borrowers have continued to service their debts,” the Council said in a statement.
‘Members noted that the proportion of borrowers in arrears has continued to rise, as have the number of financial distress claims, but from low levels.’
From May 2022, the RBA aggressively raised interest rates 13 times to a 12-year high in an effort to curb inflationary pressures, driving up costs for household borrowers.
Economists and analysts are also closely watching the release of new US inflation data for clues about the path of rate cuts abroad (Photo: Reserve Bank of Australia)
Since November, the central bank has left the cash rate unchanged at 4.35 percent, pending further evidence that inflation returns to the target range of 2 to 3 percent.
The risks of domestic commercial real estate lending (CRE) were also considered by the council during its quarterly review of the financial sector.
“Members noted that these were contained due to the banks’ low risks, conservative lending practices and the relatively strong financial position of CRE owners,” the council added.
Responding to the statement, Treasurer Jim Chalmers noted that measures coming into effect on July 1 would ease the pressures faced by households.
‘People are under the pump and that’s why our budget and economic plan are all about easing pressure on the cost of living with tax cuts for every taxpayer and energy rebates for every household and for a million small businesses said Dr. Chalmers.
Data released by the Australian Securities and Investments Commission (ASIC) last month shows that the number of hardship cases – where a borrower informs their lender that they cannot meet their loan obligations – will increase by 54 per cent in the last three months of 2024 has increased compared to the previous month. corresponding quarter a year earlier.
In May, ASIC urged banks to increase the level of support for struggling borrowers after a review found it was too difficult to access hardship assistance.
Although the regulator’s investigation found that experiences varied between lenders, in the worst cases some banks had ignored requests for help, effectively ‘abandoning customers who needed their support’.
