Commonwealth Bank Adjusts Rate Cut Timeline Amidst Labor Market Trends

7

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

The financial community widely expects the RBA to keep the cash rate stable during this session, a forecast deemed straightforward in light of the recent federal budget. However, CBA's latest insights suggest the easing cycle-initially anticipated to alleviate strained mortgage holders-will be postponed due to prevailing uncertainties surrounding inflation forecasts.

Gareth Aird, CBA's head of Australian economics, indicated that recent labor market data shows little motivation for the RBA to alter its policy direction. According to Aird, the current state of the labor market, characterized by a "loosening" at essential levels, supports a prediction that the RBA will maintain the cash rate unchanged.

"Both trend unemployment and underemployment are experiencing a gradual upward trajectory," Aird stated in the latest CBA Economics update. "Work hours are declining, and job advertisements show a discernible downward trend."

Highlighting these labor market dynamics, Aird elaborated, "Our expectation for a more significant loosening in the labor market, which varies from the RBA’s forecasts, is a principal reason why we foresee the commencement of an easing cycle in late 2024. Yet, given the persistent challenges with underlying inflation and the shrinking period to November, the likelihood of a delayed start to the easing cycle is increasing."

The economic slowdown was further highlighted by the first-quarter GDP data, which grew by a mere 0.1%. Over six months, the annualized GDP growth pace reduced to 0.8%. The RBA's current forecast places the average unemployment rate at 4.0% over the second quarter, consistent with recent predictions.

Aird noted, "Despite the bank’s non-accelerating inflation rate of unemployment estimated at 4.3%, there remains significant uncertainty regarding these projections." Additionally, RBA Governor Michelle Bullock opined that the federal government’s $300 energy bill rebate is unlikely to either significantly mitigate or exacerbate inflation levels.

Aird supported this view, referencing earlier CBA economic predictions that the rebates might subtract two-thirds of a percentage point from the third quarter’s Consumer Price Index (CPI). "While this impact is noteworthy, the RBA is more focused on the core inflation dynamics, which excludes the effects of energy rebates," he remarked.

"Our perspective is that the mechanical reduction in headline inflation for Q3, due to rebates, will potentially lower short-term inflation expectations for households and businesses, helping stabilize wage expectations over 2024 and 2025," Aird added.

The RBA's accompanying statement to its board decision is expected to maintain a neutral stance. Despite the fluctuating dynamics and economic signals, Aird emphasized that predicting the exact timing for the commencement of an easing cycle remains inherently uncertain.

Published:Saturday, 15th Jun 2024
Source: Paige Estritori

Please Note: If this information affects you, seek advice from a licensed professional.

Share this news item:

Finance News

Clear

Introducing the Kia Tasman: Kia's Entry into the Australian Ute Segment

13 Feb 2026: Paige Estritori

The Australian ute market is poised to welcome a new entrant with the upcoming launch of the Kia Tasman. Scheduled to arrive in mid-2025, the Tasman marks Kia's inaugural foray into the competitive utility vehicle segment, traditionally dominated by models like the Ford Ranger, Toyota HiLux, and Isuzu D-Max. - read more

Lightspeed Motor Company: Bringing Car Manufacturing Back to Australia

13 Feb 2026: Paige Estritori

In a bold move to revitalise Australia's automotive manufacturing sector, Melbourne-based Lightspeed Motor Company has announced plans to locally produce the Ariel Atom sports car and the Ariel Nomad off-roader. This initiative aims to address lengthy wait times and high costs associated with importing these vehicles from the UK. - read more

Volkswagen and Jayco Unveil the Crafter Kampervan: A New Era for Australian Motorhomes

13 Feb 2026: Paige Estritori

Volkswagen Australia has joined forces with renowned caravan specialist Jayco to introduce the Crafter Kampervan, a fully-equipped motorhome tailored for the Australian market. This collaboration combines Volkswagen's automotive expertise with Jayco's experience in recreational vehicles, resulting in a product designed to meet the needs of Australian travellers. - read more

Record-Breaking Occupancy Rates for Australian Caravan Holiday Parks

05 Feb 2026: Paige Estritori

Australian caravan holiday parks have reported record-high occupancy rates in December 2025, underscoring the growing appeal of caravanning among Australians. This surge is attributed to successful promotional campaigns and an increasing desire for domestic travel experiences. - read more

Crusader Caravans Teams Up with BIG4 Holiday Parks to Elevate Your Caravanning Journey

28 Jan 2026: Paige Estritori

In an exciting development for Australian caravan enthusiasts, Crusader Caravans has announced a strategic partnership with BIG4 Holiday Parks. This collaboration aims to provide new caravan owners with a suite of exclusive benefits, enriching their travel experiences across the country. - read more

Click for more Finance News