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Herald Sun
28-05-2025
- Business
- Herald Sun
Inflation, Interest rates: Blow for rate cut hopes as CPI higher than expected
Hopes of back-to-back rate cuts slid on Wednesday after inflation data came in higher than the previous month despite April usually being a month for price hikes. The Australian Bureau of Statistics' April inflation print shows the all-important trimmed mean inflation, which the Reserve Bank uses to measure Australia's inflation rate, came in hotter than expected. CPI excluding volatile items and holiday travel rose 2.8 per cent in the 12 months to April compared with a 2.6 per cent rise in the 12 months to March. Australia's overall CPI indicator – including volatile items – came in at 2.4 per cent but again was higher than market forecasts of 2.3 per cent year-on-year. Betashare chief economist David Bassanese said Wednesday's inflation reading was only 'mildly disappointing' but ruled out a July rate cut. 'With concerns over US tariff policy easing in recent weeks, and the all-important June quarter CPI report due in late July, it was always more likely that the RBA would hold off cutting interest rates until August – barring an economic emergency,' he said. High rental prices added to Australia's inflation rate. Picture: NewsWire / Andrew Henshaw The Reserve Bank of Australia started its rate-cutting cycle in February before pausing in April and reducing rates again in May. The cash rate has gone from 4.35 per cent at the start of the year to 3.85 per cent. Mr Bassanese said he expected the RBA to continue its rate-cutting cycle, but follow the quarterly data, which is the pattern set so far by the central bank. 'Given easing housing and labour cost pressures, I still anticipate further declines in underlying inflation such that the RBA is still likely to cut rates at least twice further this year – albeit not as early as July,' he said. 'My base case remains that the RBA will cut rates in August and November, directly following the next two quarterly CPI reports – assuming these reports confirm an easing in annual underlying inflation to the midpoint of the RBA's 2-3 per cent target band.' The largest contributor was food and non-alcoholic beverages, housing and recreation and culture, during the busy Easter and Anzac Day weekends. While annual food inflation eased in most categories, a spike in the price of eggs, which were up 18.6 per cent in the past 12-months due to bird flu outbreaks impacting supply, helped drive the category as a whole higher. Meanwhile housing inflation continued its up tick coming in at 2.2 per cent for the month of April up from 1.8 per cent in March. Rents rose 5.0 per cent in the 12 months to April following a 5.2 per cent rise in the 12 months to March. Despite the jump in rental costs, it is the lowest annual growth in rental prices since February 2023, consistent with rising vacancy rates across most capital cities. Electricity prices fell 6.5 per cent in the year to April, easing from a 9.6 per cent drop in March, as government rebates continued to help lower household costs. Originally published as Inflation read sours back-to-back rate cuts
The Guardian
19-05-2025
- Business
- The Guardian
Reserve Bank tipped to cut cash rate amid growing confidence Australia's inflation is being tamed
The Reserve Bank is expected to cut the cash rate on Tuesday, easing pressure on indebted households grappling with high living costs and elevated mortgage repayments. Market pricing implies a 95% chance the level will fall by a quarter point to 3.85%, amid growing confidence that inflation is being tamed. There were, however, competing views from economists that suggested the RBA could offer a surprise bumper half percentage point cut, or no cut at all, making the decision one of the most anticipated in recent times. The chief economist at Betashares, David Bassanese, said he believed inflation had eased enough to trigger a rate reduction. 'The reason they are cutting rates is not due to weakness in the economy; they're cutting rates because of well-behaved inflation,' Bassanese said. Sign up for Guardian Australia's breaking news email 'It's taking the foot off the brake rather than putting the foot on the accelerator.' A reduction from the cash rate's current elevated level of 4.1% would be viewed as a shift back towards neutral, rather than an attempt by the RBA to stimulate the economy, which currently has a soaring stock market and strong jobs market. While there is no formal definition of what the RBA deems a neutral rate, it is broadly interpreted at around the 3.35% to 3.6% level. A reduction on Tuesday, which would be the second rate cut this year, would swiftly flow through to lending rates, saving mortgaged households $114 a week for a $750,000 loan, according to Canstar. A cut would be likely to drive homebuyer activity, lifting property prices, although affordability constraints are expected to prevent the market from booming again in the near future. Pradeep Philip, partner at Deloitte Access Economics, said a rate cut would help businesses after Donald Trump's tariff regime dissuaded many companies in Australia from investing in new equipment and technology. 'It'll be a big signal around business investment, and it effectively would be a bit of insurance being taken out against global instability,' Philip said. The initial shock of Trump's 'liberation day' tariffs convinced some forecasters to tip a bumper half percentage point cut in May amid fears the global economy would fall into recession, and create a need to stimulate economic activity in Australia. That view lost favour in recent weeks due to moves by Trump to wind the tariffs back and mend economic relations with China. Global share markets, including in Australia, had also recovered, fuelling investor confidence and lessening the need for a local stimulus. Sign up to Breaking News Australia Get the most important news as it breaks after newsletter promotion A strong jobs market and rising wages in Australia also caused some economists to pare their rate cut expectations. ANZ expected a quarter point cut on Tuesday was 'more likely than not', while noting there was a chance of the RBA surprising the market by holding rates steady. In the hold scenario, everything from equity prices to the value of the Australian dollar would need to adjust, which would lead to volatile market movements after the announcement on Tuesday afternoon. The RBA has consistently pushed back against predictions it would deliver a string of rate cuts as it tries to wind inflation back further. The chief economist at the Centre for Independent Studies, Peter Tulip, said the current rate settings were keeping a lid on inflation. 'The RBA argued [in February] a sizeable reduction in rates, as the market then and now is expecting, would lead to inflation above the target,' Tulip said, in comments published by the Australian National University. 'Incoming data releases do not indicate any reason to revise that conclusion.'
News.com.au
01-05-2025
- Business
- News.com.au
‘Good enough': ASX200 rises on RBA May rate cut prediction
Fresh hopes of an interest-rate cut helped drive the Australian sharemarket higher on Wednesday with index heavyweights including the major banks, CSL and Wesfarmers all finishing in the green. The benchmark ASX200 index gained 55.60 points, or 0.69 per cent, to finish the session at 8,126.20 points after jumping right on the bell. The broader All Ordinaries also rose 53.10 points or 0.64 per cent to finish Wednesday at 8,341.00 points. The Aussie dollar gained 0.30 per cent to buy US64 cents at the bell. The market continued to march higher following the announcement of Australia's consumer price index, which has increased the likelihood of a rate cut on May 20. Betashares chief economist David Bassanese said Australia's good but not great CPI reading should be enough to sway the Reserve Bank to cut interest rates. 'Although the March quarter consumer price index results were a touch higher than market expectations, they were overall still good enough to cement the case for an RBA rate cut at the May policy meeting – especially given recent added downside risks to global growth due to US tariff uncertainty.' The all important trimmed mean inflation, which the RBA uses as its guide, came in at 2.9 per cent for the year, down from 3.3 per cent, bringing the rate back within the central bank's target range of 2 to 3 per cent for the first time in nearly four years. Seven of the 11 sectors finished in the green, led by information technology, A-REITs, healthcare and consumer discretionary sectors. Wesfarmers added 1.6 per cent to $78.32, while gaming companies Aristocrat Leisure and the Lottery Corporations grew 1.86 and 2.35 per cent respectively. Healthcare provider CSL jumped 2.32 per cent to $251.13, while market darling Pro Medicus advanced 2.16 per cent to $229.41 and Cochlear finished in the green up 1.39 per cent to $274.59. The big four banks also helped drive the market higher, with the financial sector overall gaining 1.10 per cent. Market heavyweight CBA soared 2.22 per cent to close at $166.60 while Westpac advanced 0.55 per cent to $32.84, NAB finished up 0.50 per cent to $36.13 and ANZ jumped 1.05 per cent to $29.86. Saxo chief investment strategist Charu Chanana said today's results would likely slow down the RBA for future rate cuts after May. 'Australia's inflation surprise reinforces that we're not past the inflation problem yet — especially with tariff risks still looming globally.' Ms Chanana said. 'The RBA will have to remain cautious, and while a May rate cut is fully priced in, expectations for five cuts this year may need to be revised down.' In corporate news, supermarket giant Coles revealed $10.4bn worth of sales for the March quarter, as customers continue to target cheaper items. Overall, prices rose 1.5 per cent across the supermarket. Excluding tobacco, supermarket inflation was 1.1 per cent. 'Continued increases in livestock costs impact inflation in meat, particularly across the lamb, pork and poultry categories,' Coles chief executive Leah Weckert said. Shares in Coles dipped 0.75 per cent to $21.22. Northern Star Resources slumped 3.52 per cent to $19.18 after the gold miner announced its full year output guidance, which will see the company spend more on maintenance and royalty costs. Star Entertainment also announced pressures on its bottom line with the casino operator reporting an EBITDA loss of $21m in the three months to March. The company reiterated warnings of 'material uncertainty of the group's ability to continue' as investors can vote on the Bally's Corporation takeover in late June.
Perth Now
30-04-2025
- Business
- Perth Now
ASX lifts on rate cut hopes
Fresh hopes of an interest-rate cut helped drive the Australian sharemarket higher on Wednesday with index heavyweights including the major banks, CSL and Wesfarmers all finishing in the green. The benchmark ASX200 index gained 55.60 points, or 0.69 per cent, to finish the session at 8,126.20 points after jumping right on the bell. The broader All Ordinaries also rose 53.10 points or 0.64 per cent to finish Wednesday at 8,341.00 points. The Aussie dollar gained 0.30 per cent to buy US64 cents at the bell. The ASX200 gained ground on Wednesday. NewsWire / Jeremy Piper Credit: News Corp Australia The market continued to march higher following the announcement of Australia's consumer price index, which has increased the likelihood of a rate cut on May 20. Betashares chief economist David Bassanese said Australia's good but not great CPI reading should be enough to sway the Reserve Bank to cut interest rates. 'Although the March quarter consumer price index results were a touch higher than market expectations, they were overall still good enough to cement the case for an RBA rate cut at the May policy meeting – especially given recent added downside risks to global growth due to US tariff uncertainty.' The all important trimmed mean inflation, which the RBA uses as its guide, came in at 2.9 per cent for the year, down from 3.3 per cent, bringing the rate back within the central bank's target range of 2 to 3 per cent for the first time in nearly four years. Seven of the 11 sectors finished in the green, led by information technology, A-REITs, healthcare and consumer discretionary sectors. Wesfarmers added 1.6 per cent to $78.32, while gaming companies Aristocrat Leisure and the Lottery Corporations grew 1.86 and 2.35 per cent respectively. Healthcare provider CSL jumped 2.32 per cent to $251.13, while market darling Pro Medicus advanced 2.16 per cent to $229.41 and Cochlear finished in the green up 1.39 per cent to $274.59. Seven of the 11 sectors finished Wednesday's trading in the green. Picture Newswire/ Gaye Gerard. Credit: News Corp Australia The big four banks also helped drive the market higher, with the financial sector overall gaining 1.10 per cent. Market heavyweight CBA soared 2.22 per cent to close at $166.60 while Westpac advanced 0.55 per cent to $32.84, NAB finished up 0.50 per cent to $36.13 and ANZ jumped 1.05 per cent to $29.86. Saxo chief investment strategist Charu Chanana said today's results would likely slow down the RBA for future rate cuts after May. 'Australia's inflation surprise reinforces that we're not past the inflation problem yet — especially with tariff risks still looming globally.' Ms Chanana said. 'The RBA will have to remain cautious, and while a May rate cut is fully priced in, expectations for five cuts this year may need to be revised down.' In corporate news, supermarket giant Coles revealed $10.4bn worth of sales for the March quarter, as customers continue to target cheaper items. Overall, prices rose 1.5 per cent across the supermarket. Excluding tobacco, supermarket inflation was 1.1 per cent. 'Continued increases in livestock costs impact inflation in meat, particularly across the lamb, pork and poultry categories,' Coles chief executive Leah Weckert said. Shares in Coles dipped 0.75 per cent to $21.22. Northern Star Resources slumped 3.52 per cent to $19.18 after the gold miner announced its full year output guidance, which will see the company spend more on maintenance and royalty costs. Star Entertainment also announced pressures on its bottom line with the casino operator reporting an EBITDA loss of $21m in the three months to March. The company reiterated warnings of 'material uncertainty of the group's ability to continue' as investors can vote on the Bally's Corporation takeover in late June.
The Guardian
26-03-2025
- Business
- The Guardian
Australia's easing inflation rate a boost for mortgage holders eyeing next rate cut – and Labor's election hopes
Australia's inflation rate has eased again, in data that will buoy Labor heading into an election and raise hopes for mortgage holders another interest rate cut is not far off. The headline inflation rate was 2.4% in the 12 months to February, a slight decrease on the previous month's figure, according to consumer price index figures released on Wednesday. Crucially, the Reserve Bank of Australia's preferred measure for inflation, the 'trimmed mean' or underlying inflation that strips out volatile items and various government subsidies, fell to 2.7% from 2.8%. While most economists do not expect the RBA to reduce rates at its meeting next week, the reduction means a surprise cut is not completely off the table for 1 April, the last decision before the election. The prevailing view, however, is that a cash rate cut in May, which would fall just after an election, is more likely. Sign up for Guardian Australia's breaking news email The chief economist at Betashares, David Bassanese, said the fresh CPI figures may 'open scope' for a cut in May. 'My base case is cuts in May and August,' Bassanese said. The drop in the inflation rate is a positive development for the Labor government ahead of an election expected to be fought over competing cost-of-living policies. The CPI data shows that the relentless increase in rental prices have eased, as have prices for new homes. The Australian Bureau of Statistics data also shows that electricity prices are falling, aided by government rebates. The treasurer, Jim Chalmers, said on Wednesday the data represented 'more positive and promising news' in the fight against inflation. 'We know that these monthly numbers are volatile and can bounce around but the direction of travel on inflation is clear,' Chalmers said. The government's budget papers, released on Tuesday, suggest Australia is 'increasingly likely' to come out of the inflationary period with a soft economic landing, rather than a thud. Sign up to Breaking News Australia Get the most important news as it breaks after newsletter promotion The RBA has consistently signalled that it 'was not yet assured' inflation could be returned to the target range with a lower cash rate, dampening expectations of further cuts. But the central bank has also acknowledged there's a danger in keeping rates elevated for too long. While central bankers are concerned cutting rates too early could trigger another bout of inflation, keeping rates elevated risks squeezing the economy, leading to unnecessary household pain and job losses. The US's tariff regime is also expected to weigh on the global economy, making it more likely that some central banks will need to cut rates to stimulate growth. The RBA is looking for the trimmed mean to keep moving to the midpoint of its 2% to 3% band. Most economists have pencilled in between one and three cuts for 2025, in addition to the RBA's decision last month to decrease the cash rate by a quarter point to 4.1%. Changes in the official cash rate flow through to borrowing and savings rates, including mortgages and deposit accounts. AMP economist My Bui said on Wednesday the RBA will need to be 'increasingly mindful' of the negative impacts of a global trade war on the Australian economy. 'We believe the next rate cut would be in May, following the release of the comprehensive tariff reviews from the US and the full quarterly inflation figures for Australia,' Bui said.
