BoC cuts again
The Bank of Canada slashed interest rates by 50 basis points to 3.75 per cent as expected today, while the Bank of England's Andrew Bailey came out with some similarly appropriate dovish comments.
The Reserve Bank of New Zealand is also now
widely expected to take the cash rate down to 3.50 per cent over the coming months, a little lower than previously believed.
Back home in Australia, interest rates are increasingly causing angst in the form of rising mortgage stress, cripplingly low new housing supply, and a steepling surge of corporate insolvencies.
But is there any respite due?
And, if so, when?
Inflation preview
The US government appears to have cranked the money printers up again in a late bid to shade a closely fought election, and bond yields globally have reverted higher over recent weeks.
Back home in Australia, Wednesday morning next week sees the release of Australia's most up-to-date inflation figures for both the month of September 2024, and for the September quarter.
The Melbourne Institute has previously reported its survey which suggests that we should be in for a fairly modest or soft result over the year to September, probably back down to within the 2 to 3 per cent target range.
Source: Westpac
The great Justin Smirk of Westpac has crunched carefully through his numbers and expects to see quarterly headline inflation of just 0.3 per cent (for 2.9 per cent inflation over the year), and monthly inflation of 0.2 per cent (for just 2.2 per cent over the year).
The figures are expected to be forcibly held lower by subsidies in the form of the Commonwealth energy bill relief, which has been taking electricity prices lower through the third quarter of the calendar year.
Source: Westpac
Headline inflation figures are important, not least because wages, commercial rents, and other price increases can be indexed against the consumer price index (CPI), and because inflation expectations also tend to be influenced by consumer prices as actually experienced.
The Reserve Bank of Australia will be keen to see that underlying or core inflation is also trending down, and Westpac expects to see 0.7 per cent for trimmed mean inflation in the September quarter, taking the year-on-year figure down from 3.9 per cent to 3.5 per cent.
Stephen Wu from the Commonwealth Bank of Australia produced a near-identical forecast of 0.3 per cent inflation for the September 2024 quarter, and a slightly softer 3.4 per cent result for trimmed mean inflation over the year (slightly below the implied forecasts of the Reserve Bank).
The outlook
Looking ahead, for as long as oil prices remain below $80/barrel, we should see ongoing disinflationary pressures from fuel prices.
Indeed, deep into October we've being seeing unleaded fuel from around 160 cents per litre around here over the past week, which is plenty lower than at the highs of near $2/litre, and a significant psychological blow in the battle against inflation.
Source: Westpac
Rental price inflation is still printing high on the official ABS figures but is clearly set to moderate in time, while rampaging construction cost inflation in Australia has now cooled dramatically.
The wrap
To date, jobs growth in Australia has remained very strong, and as such interest rates are likely to stay on hold until there is much clearer evidence of this dynamic changing.
However, an inflation result in this kind of range would also all but clear the path for interest rate cuts as and when they're deemed to be required.
---
Some other interesting stats were released by the ABS yesterday, perfectly summarised by Cameron Kusher of the REA Group (a great follow, if you don't already):
---
P.S. Whenever you’re ready…here are 5 ways I can help you manage your own money and go next level wealth:
- Boom or Bust – 20 minute online workshop for investors
Register for my next free online training - Boom or Bust? How to change your investment plan - book in here
You also download a free copy of my e-book The Only 6 Ways to Become Wealthy here.
2. Download our property buying guide
Download our free property buying guide here.
You can also check out a few of our recent property investment purchases here.
Get in contact with us today if strategic property investment is your thing.
3. Subscribe to our Top 10 Podcasts for Investors
Listen in to our podcasts
The Australian Property Podcast is rapidly becoming one of Australia's biggest business podcasts, now with well over 50,000 audio downloads per month, and growing fast.
And our popular Low Rates High Returns Show also remains available on Spotify.
4. Subscribe for my free daily blog
Subscribe for my free daily blog with some 3.7 million hits here.
You can also catch up with me daily on Twitter here, where I'm active daily and have over 14,500 followers.
By the way, I'm a 7-times published author on finance and investing, so you can check out some of my books here.
My new book, co-authored with Cate Bakos is available to buy here or on Amazon here - follow our book release on Facebook here and at our Buy Right podcast series here.
5. Work with me privately
For a limited time you can book in a free diagnosis call with me here, so book in a call today.
