Since 2022, the RBA has increased interest rates 13 times to manage inflation, reaching a peak of 4.35 per cent in November 2023. During their recent December meeting, the RBA board opted to maintain the current interest rates, offering homeowners a break during the festive season. However, RBA’s Michele Bullock hinted at the potential for more stringent measures in the upcoming months. So, will the Reserve Bank raise interest rates in 2024?
Bullock stated, “Decisions about potential tightening of monetary policy will be influenced by data trends and evolving risk evaluations.”
The inflation data for the December quarter is slated for release on 31 January, just before the RBA board convenes in early February. This data will likely shape the RBA’s decision on whether to adjust interest rates. Duncan commented that further rate hikes in 2024 are plausible.
Given the circumstances, Duncan expressed skepticism about a return to the desired inflation range of two to three per cent before mid-2025. He emphasized that considering prevailing economic conditions, the prospect of additional interest rate hikes remains a possibility for the foreseeable future.
Will housing prices continue to rise around Australia?
In 2023, numerous regions across the country witnessed a sharp surge in housing prices, pushing the national median price to $762,000 as reported by PropTrack.
Renters encountered challenges as well, especially in major cities where vacancy rates remained persistently low.
PropTrack’s October rental report highlighted a 5.7 percent decline in new rental listings for September compared to the same period the prior year.
The heightened demand for rental properties, coupled with limited availability, has driven up prices significantly. As per realestate.com.au, the national median weekly rent now stands at $550, marking a 14.6 percent rise over the past year.
Duncan anticipates that rental costs will remain elevated until a more balanced equilibrium between supply and demand is achieved.
He remarked, “The consistent surge in rental prices stems from the acute shortage of available rental units. Unless we witness vacancy rates climbing to around 2 to 3 percent, substantial reductions in rents seem unlikely.”
Duncan emphasized that addressing this imbalance is crucial and should be a focal point for the government in 2024.
Will Australia face a recession in 2024?
During challenging economic periods, concerns about a recession often surface. However, Koulizos pointed out that Australia’s minimal unemployment rate diminishes the likelihood of a recession in 2024, despite ongoing financial hurdles.
He commented, “A significant factor that could push us into a recession would be soaring unemployment rates. Currently, irrespective of the industry, employers are in dire need of workers but are struggling to find enough.”
Koulizos expressed optimism about the economic outlook for 2024, suggesting that while not exceptional, the year should present more favorable conditions compared to 2023.
Duncan emphasized that while a “technical recession,” defined by two consecutive quarters of economic contraction, seems improbable, a significant portion of Australians will grapple with financial challenges in the upcoming year.
He remarked, “It’s essential to approach the concept of a recession with nuance. The impact varies among individuals and families, with some experiencing greater hardships than others.”
Duncan stressed that even in the absence of a formal recession, the government must acknowledge the widespread financial strain faced by many. He added, “The old adage applies: if the economic hardships resemble a recession in perception and experience, then it essentially becomes one, irrespective of whether official metrics indicate zero growth.”
