Economist Predicts Early Christmas Gift for Struggling Households as Reserve Bank Expected to Maintain Stable Interest Rates

Picture: NCA NewsWire/Christian Gilles

   

   Independent economist Warren Hogan has endorsed the Reserve Bank of Australia (RBA) to maintain current interest rates, presenting a potential early Christmas relief for households facing financial struggles.

The RBA is scheduled to convene on Tuesday to assess whether adjustments are necessary in light of the upcoming holiday season. While most experts anticipate the bank to keep rates unchanged, Hogan, speaking on Sky News Australia's Business Now, pointed out the complexities introduced by the resilience observed in certain sectors of the economy. He cautioned that despite the expected status quo, the RBA might need to consider further adjustments in the new year.

Hogan remarked, "I think there's another move, at least in February because this economy is lagging. It's behind the rest of the world, behind the US." He emphasized that recent data indicated lingering inflation, albeit reduced, and underscored the economy's durability in the face of rate hikes.

The economist highlighted the potential for markets to reassess their expectations if the RBA is compelled to act due to persistent inflation. He noted that services inflation, a primary concern for the bank, has proven stubborn in other countries, leading central banks to implement rate hikes to cool their economies.

Concerns were raised about Australia potentially facing a similar scenario in the coming months, driven by surging migration and a severe housing supply shortage. Hogan suggested that households should not anticipate rate cuts until at least the end of 2025.

While the Albanese government has implemented measures to ease economic pressure, such as welfare payment increases and infrastructure project funding cuts, inflation has not aligned with the RBA's initial forecasts. Governor Michele Bullock, in notes accompanying the November rate decision, acknowledged that underlying inflation, excluding volatile items, was "higher than expected." She also highlighted an increased risk of inflation persisting at elevated levels, aligning with Hogan's forecast of potential rate hikes in the coming year.