What next for the economy?
Australian home owners and investors have been given a 2-month reprieve on rate rises and now they might be getting used to it.
But that might not be the end, with the outgoing RBA Governor Phil Lowe giving himself the option of more rises in his last press conference.
Just recently a survey of insolvency professionals conducted by KordaMentha had 70% anticipating a recession in the next 12 months.
So, the big question: Is this the end of the interest rate hikes? And what is the lasting impact of the previous rises on the overall economy?
Loads of data is there to review and assess. Nearly every day we are bombarded with reports and news about the economy, some good, some bad.
So here is a quick breakdown of latest data that the RBA will no doubt be reviewing in their September meeting.
Firstly, the key driver of the RBA’s decision is inflation. Inflation is still too high at 5.4% over the 12 months to June, following the fall the previous month from 6.8% to 5.6%. The rate rises are working to reduce inflation. But what are they doing to the rest of the economy?
Retail sales fell by .8% in June 2023, according to the ABS, mainly due to the weaker than usual spending at the end of financial year sales.
Rents continue their upward trajectory over July, with no end in sight to the chronic lack of housing supply.
Economic growth is almost stagnant at 0.2% in the March quarter – the slowest growth since the lockdowns in September 2021. This shows that the RBA rate rises are having an impact on spending.
In the biggest paradox of the economy currently is that unemployment remains low at 3.7% in July (up from 3.5% in June). Typically, when the economy slows and rates rise to combat inflation, then employers start to shed jobs. At this stage, this is not occurring due to an exceptionally tight labour market. The RBA will be watching this figure closely in the month to come.
Wages rose 0.8% in the June quarter, which was the same as the 2 previous quarters, but less than the market was expecting, including the RBA.
The RBA believes the inflation fight is not over, but perhaps the tide is turning and many economists are now thinking that a rate rise in September is not a given. However, there may be 1 – 2 more yet to come, but there is definitely light at the end of the rate rise tunnel.
If you'd like to review your home loan to make sure your best prepared to weather the uncertian econimic outlook, give us a call, or book a chat today.