/ 04 July 2023

It’s the first Tuesday of the month…

Image source: AAP
Image source: AAP

THE SQUIZ

Strap yourself in for another Reserve Bank decision on interest rates… The central bank’s board will get together today to make a call on whether the cash rate should be raised again or whether to hold tight as they continue their mission to rein in national inflation. The official cash rate sits at 4.10% after 12 quickfire rises over the past 14 months. And while there’s been promising signs over the past month that the inflation rate is on its way down, what the RBA will announce this afternoon is anybody’s guess

TELL ME MORE ABOUT THOSE PROMISING SIGNS…

Gladly. You might recall last week’s news that inflation in the 12 months to May had dropped to 5.6% from 6.8% in April, beating economists’ predictions. It’s also the lowest rate recorded in 12 months. And while that was welcomed, it’s still well above the Reserve Bank’s 2-3% target. One of the biggest contributors to May’s inflation figure was housing, and yesterday, new data from the Bureau of Stats backed that up. New housing approvals jumped by 20% nationally in May, while CoreLogic data showed a slight recovery in house prices in most capital cities in June. Retail data is another important one to note… Reports say shoppers took advantage of early EOFY sales in May, leading to a 0.7% rise in retail sales – above economists’ predictions. So, on the one hand, the official data shows that inflation’s falling – usually, that’s because we’re not out spending. On the other, the official data shows us out spending. Insert shrugging lady emoji…

SO WHAT’S THE HOT TIP FOR TODAY?

The cash rate is expected to increase a couple more times this year. Whether that’s today or later, the experts say it’s a’comin… So really, it’s a question about where our economy is heading. A survey of 27 Australian economists showed nearly all of them expect Oz to fall into a ‘per capita recession’ that would see living standards go backwards as economic growth stalls and population growth rises. And despite agreeing that inflation’s on the way down, they expect the cash rate to peak at 4.7% in November before dropping to 4.3% in mid-2024 and 3.9% by the end of next year. A lot can happen between now and then, so hang in there…

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