Interest Rate Predictions: Will We See a Cut This February?

Welcome back to another insightful episode of Talk Property To Me! I'm your host, Brad East, alongside my co-host, Aaron Downie. In this episode, we dive deep into the current economic landscape in Australia, focusing on the latest trends in inflation and interest rate predictions.

We kick off the discussion by examining the recent decline in Australia's inflation rate, which has dropped to 2.5% in the December quarter from 2.8% in the previous quarter. We break down the components of inflation, distinguishing between goods inflation (currently at 0.8%) and services inflation (still high at 4.3%). We clarify what constitutes goods inflation—physical items like groceries, fuel, and building costs—and services inflation, which includes non-physical items such as rent, healthcare, and education.

As we explore the factors influencing these inflation rates, we highlight the impact of supply chain issues, global oil prices, and labor costs. We discuss how recent wage increases, driven by government policies, have led to higher operational costs for businesses, which in turn affects consumer prices. We also touch on the effects of the COVID-19 pandemic on sectors like education, particularly regarding the influx of foreign students.

The conversation shifts to the rental market, where we note early signs of decreasing rental prices, which could significantly impact overall inflation figures. We emphasize the importance of rent as a substantial component of services inflation and how its decline could lead to a more favourable economic environment.

We then delve into the implications of potential interest rate cuts, particularly the 80% market odds for a 0.25% rate cut in February 2025. We discuss how lower interest rates could enhance affordability for first-time buyers and stimulate growth in the property market. However, we caution that waiting for these reductions might lead to missed opportunities as property values may rise in the interim.

In addition, we analyse the broader economic context, including the influence of U.S. market trends on Australia and the potential impact of the upcoming election on government spending and inflation. We break down the differing approaches of the Labor government and the opposition, highlighting how changes in government policy could affect inflation levels.

As we wrap up, we encourage listeners to take proactive steps in negotiating rent reductions and mortgage rates, emphasizing the importance of communication with landlords and banks. We conclude on a hopeful note, suggesting that the economic outlook for 2025 and beyond appears promising, with signs of recovery and growth on the horizon.

Join us for this engaging discussion, and as always, we welcome your feedback and topic suggestions for future episodes. Catch you next time on Talk Property To Me!

• 00:00:00 - Introduction to Inflation and Interest Rates in Australia
• 00:00:10 - Current Inflation Rates Overview
• 00:00:27 - Understanding Goods vs. Services Inflation
• 00:00:40 - Headline Inflation Figures Explained
• 00:01:43 - Impact of Goods Inflation on Retailers
• 00:02:04 - Services Inflation and Its Drivers
• 00:02:42 - COVID-19's Effect on Education Sector Prices
• 00:03:28 - Childcare Costs and Insurance Implications
• 00:04:35 - Rental Prices and Their Impact on Inflation
• 00:05:00 - Potential Decrease in Rental Prices
• 00:05:23 - Effects of Rate Cuts on Property Buyers
• 00:05:53 - Bank Predictions and Fixed Rates
• 00:06:17 - Understanding Bank Strategies with Fixed Rates
• 00:07:06 - Global Economic Influences on Australian Inflation
• 00:08:41 - Local Factors Affecting Interest Rates
• 00:09:10 - Historical Trends: Australia Following the U.S.
• 00:10:47 - Political Landscape and Its Economic Implications
• 00:11:20 - Odds of a Rate Reduction in February 2025
• 00:12:15 - Arguments For and Against Rate Cuts
• 00:12:40 - Impact of Rate Cuts on Rental Markets
• 00:13:34 - Negotiating Rent Reductions as a Tenant
• 00:14:17 - Wrap-Up: Future Economic Outlook
• 00:14:58 - Conclusion and Additional Resources

ABOUT THE HOSTS

BRAD EAST

Brad East is the Managing Director of Wisebuy Home Loans. Brad is an award-winning mortgage broker and has helped thousands of clients gain finance to purchase properties. Wisebuy Home Loans is the go-to mortgage brokerage for clients wanting out-of-the-box applications approved.

Website → https://wisebuygroup.com.au 

LinkedIn → https://www.linkedin.com/in/newcastlemortgagebroker/ 

Instagram → https://www.instagram.com/bradeast_mortgagebroker/ 

Facebook → https://www.facebook.com/bradeastofficial

AARON DOWNIE

Joining the podcast in 2024, Aaron Downie is a seasoned property investor and director of Mackenzie Buyers Agency. Aaron’s deep understanding of the property market and investment strategies provides listeners with invaluable insights.

Website: https://www.mackenziepropertygroup.com.au/

Linkedin: https://www.linkedin.com/in/aaron-downie-1b2749134/