Interest rates set to fall...
Gareth Aird of CBA sees 50 basis points of interest rate cuts ahead later in the year.
Source: CBA
CBA's forecast is predicated upon inflation falling materially faster than Reserve Bank estimates.
Importantly, CBA's wage indicator suggests that wages growth was only 3.4 per cent over the 2022 calendar year.
With immigration now set to roar to record highs, the risks of strong wages growth are now low.
Indeed, the number of unemployed persons seems to have bottomed out from around July 2022.
It's worth remembering that last year CBA saw the terminal cash rate target at just 1.25 per cent, and we have blazed waaayy past that level already.
It would be good news for housing supply, though why we still have a 300 basis points lending assessment buffer is a mystery given that nominal incomes are rising and 3-year yields are under 3 per cent.
The appropriate buffer has been 250 basis points in the ordinary course of events.
