Saturday, December 21, 2024

Live: Australian home owners facing higher interest rates, as ASX awaits the RBA’s next cash rate decision

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ANZ’s economics team has circulated its”macro weekly” note.

It has these interesting passages on Queensland’s state budget (which was delivered this week) and how it fits into the national story about cost of living and inflation:

“The Queensland State Budget contained a large ‘cost-of-living package’ worth $3.7bn in 2024-25.

“For perspective, the entire discretionary fiscal easing in the Federal Budget for 2024-25 was $9.5bn, and Queensland has around one fifth of Australia’s population.

“With other states also providing cost-of-living packages, the additional fiscal easing is starting to become material at around ½% of GDP in 2024-25.

“The NSW State Budget is due on Tuesday 18 June.

Cost-of-living measures will have a large downward influence on Q3 headline CPI, which could show no inflation in the quarter. Trimmed mean inflation should be largely unaffected by these measures, however [NB: ‘trimmed mean’ refers to the measure of underlying inflation the Reserve Bank focuses on].

“It is highly unlikely that the RBA would cut rates off the back of a low headline CPI print achieved through significant, temporary government subsidies, especially given the risk those subsidies might support consumer demand and, with a lag, higher inflation.

“The RBA typically ‘looks through’ such one-off impacts on inflation.

“Turning to this coming week’s RBA Board meeting (announcement at 2:30pm on Tuesday 18) we expect the cash rate to remain at 4.35%.

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