Australia’s property market is holding its breath. With just two Reserve Bank meetings left this year, a pre-Christmas interest rate cut has become an “inevitable” outcome, according to a leading analysts, offering a glimmer of hope for struggling homeowners and eager buyers.
But don’t pop the champagne just yet. The RBA Governor herself has cast a shadow over these predictions, hinting that the central bank might not be so quick to deliver an early festive gift, leaving the market grappling with conflicting signals.
Dale Gillham, founder and chief analyst at Wealth Within, however, is unequivocal in his assessment, declaring that the RBA’s focus has dramatically shifted from inflation to a desperate bid to prop up a faltering economy.
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“Forget inflation, that’s yesterday’s battle. Today, Australia’s real problem is much darker – the economy is quietly stalling, and the RBA knows it,” Gillham asserts.
Everyone’s been obsessed with prices being “higher for longer” headlines, but inflation isn’t what’s driving the Reserve Bank anymore; it’s fear. Fear that Australia’s growth engine is grinding to a halt right under their nose.
Dale Gillham, founder and chief analyst at Wealth Within
Gillham paints a grim picture of an economy flashing red warning lights.
He points to the ANZ-Indeed Job Ads Index, which plunged another 3.3 per cent in September, now at its lowest since early 2024, marking three straight months of decline.
“That’s three straight months of job postings gone. Businesses aren’t hiring, they’re freezing, waiting and watching,” Gillham says.
“The jobs engine that kept this economy afloat through the inflation storm is now spluttering.”
Consumer confidence is equally bleak, with the Westpac-Melbourne Institute Consumer Sentiment Index crashing 3.5 per cent to 92.1, its weakest in six months.
“Optimism is evaporating, and spending is drying up, and when households stop spending, the RBA stops sleeping,” Gillham notes.
The construction sector, a cornerstone of Australia’s economy, is also buckling, according to Gillham.
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With just two RBA board meetings left for 2025, a rate cut before Christmas has become an increasingly inevitable outcome.
Persistent labour shortages and a dwindling pipeline of new projects are causing widespread distress.
For Gillham, these indicators leave the RBA with no choice.
While they may wait through November, “by December, they’ll have no choice; the pressure will be too great. A rate cut isn’t a possibility anymore; it’s inevitable.”
He cautions, however, that this would not be a victory lap, but a “rescue mission” to prevent an economic spiral.
Bullock’s counterpoint: ‘Marginally tight’ policy
Yet, despite Gillham’s compelling argument for an imminent rate cut, recent commentary from RBA Governor Michele Bullock introduces a significant counterpoint, suggesting that such a move before Christmas may be unlikely.
In a Nomura fireside chat, Ms Bullock offered a more nuanced view of the current monetary policy stance, describing interest rates as “marginally tight.”
She clarified that the RBA doesn’t consider policy restrictive or accommodative, but rather “a little on the tight side but not much.”
This assessment implies that the economy is nearing a “neutral rate,” a theoretical point where monetary policy neither stimulates nor restricts growth, and inflation and employment remain stable.
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RBA Governor Michele Bullock says Australia’s economy was getting close to the neutral rate.
In such a scenario, the RBA typically opts to keep interest rates on hold.
This cautious stance from the Governor aligns with forecasts from major financial institutions like Commonwealth Bank and ANZ, both of whom predict the next rate cut will occur in February next year, rather than in the immediate lead-up to Christmas.
While the RBA has already delivered three rate cuts this year, bringing the cash rate down from a peak of 4.35 per cent to the current 3.6 per cent, Ms Bullock’s remarks suggest a more measured approach to further reductions.
The anticipated “Christmas gift” of a rate cut, therefore, remains firmly in the balance, transforming the narrative from an inevitable rescue mission to a more prolonged period of economic observation.
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