While many Australians grappled with the cost of living in 2024 - many experts expect the new year to bring interest rate cuts and a further easing of inflation. Dr Susan stone, the chair of economics at the university of south Australia. Says she predicts an easing of interest rates in the second quarter of the economic year ahead.
Category
đŸ“º
TVTranscript
00:00Well, we are expecting an easing. Most people think it will come back to the target rate
00:08sometime in the first half of the year, if not certainly by the end of the year. So there
00:14is this expectation of interest rates easing coming on board in 2025.
00:19So tell us a bit more about the interest rate cuts that could be ahead. What are your predictions
00:24for this year?
00:26Well, I would think that February meeting, they meet in February and then again in April
00:33and then again in May. And I think February might be a bit too soon. I think they'll want
00:38to see what the end of the year numbers look like. We'll see quarterly GDP for the end
00:43of the year come out in January. So they'll have those numbers. So unless something really
00:47big happens, I think February might be a bit too soon. So I would look more like April
00:52or May to be most likely seeing the first rate cut.
00:58And what's your take on the talk that the RBA has been sitting on its hands for too
01:02long because comparisons have been made to overseas where rates have been cut. How relevant
01:07is that to our economy?
01:08Well, a lot of the inflationary pressures that we've seen lately have been domestic
01:15based. They've been from services and other domestic issues. So the RBA really has to
01:22keep an eye on what's happening at home. They can certainly look to see as a potential
01:28path of other countries, but it's more important to to focus on what's happening here, because
01:33the last thing they want to do is to start cutting too soon. Because if we get into a
01:38whole nother inflationary spiral, we're right back to square one. So they want to be careful
01:44and be sure that when they do start to cut rates, that we well and truly have inflation
01:48under control.
01:50Now, of course, all of this is intertwined. But where are house prices expected to go
01:54this year and also rent prices?
01:56Right. Well, we have seen already at the end of the year a bit of an easing in housing
02:02prices. We see houses being on the market a bit longer, more houses being passed over.
02:09So we do expect there to be an easing in the housing market. Now, that doesn't mean we're
02:15going to see prices coming down necessarily, but we will see we should see a slowdown in
02:22that growth of prices. And that should come along with rental prices as well. And when
02:29we see there's like a chain reaction here for rental prices, when we see construction
02:36constructions coming online doing it's struggling, but houses are starting to be
02:41completed. We see more of this backlog being eaten into, which means people will get out
02:47of rental properties, get into the homes that they were renovating or building. That will
02:51also help ease up the rental market, we hope.
02:54It was a good year for share markets in 2024. What was behind that for us and any
02:59predictions for this year?
03:01Yeah, well, I mean, overall, the economy in Australia, the cost of living has been has
03:06been difficult. But the economy is really not doing all that badly in terms of growth
03:12potential, oversee markets potential, and company performance. We've seen lots of
03:18profitability and good opportunities for investors. So that, of course, pushes the share
03:24market and helps keep things going. In 2025, growth projections for Australia are
03:30supposed to improve. We were about, you know, a little bit over 1% this year. Next year,
03:34it's supposed to go up to as much as 2%. So we do expect significant improvements in
03:40growth. And as inflation eases, cost of living should, should help even out. And that
03:46will be even better news for companies performance.
03:50What would you say the bigger challenges ahead for the Australian economy this year, but
03:54also any bright spots?
03:56Right, okay. Well, I do think housing will continue to be a challenge. There's a housing
04:01shortage, that's not going to go away in a year. So we'll continue to see that to be a
04:07challenge. I think that cultural exports, agricultural production is expected to be
04:15slightly down this year. Of course, last year was a record year. But But this year, we
04:19expect there to be a bit of a decline in output, which, which will hurt Australian
04:25exports. The minerals markets are a bit mixed right now. So we'll have to see what
04:30happens with those going forward. But overall, as I said, overall growth is supposed to be
04:35good, we should have inflation under control, the cost of living should should actually
04:40start to even out and we hopefully will find and so we expect there to be maybe some some
04:48performance records and maybe some increase in in wages, which should help the economy
04:53continue to grow and get out of this current lacklustre performance.
04:58And so Dr. Stone, overall, how are Australians feeling about their financial health this year?
05:03And will that likely bear out?
05:06Um, I think the consumer sentiment has been has been fairly weak toward the end of the
05:11year. But I think people are starting to have looking forward to that rate cut that we're
05:16talking forward to getting out of 2024, which was always expected to be a tough year is
05:22always going to be a transition year. And so hopefully getting into a more positive, more
05:27growth projections going forward, getting getting mortgages once they get their rate
05:32cut, getting mortgage payments, and feeling better about their financial position. Once
05:38that debt, that interest rate on debt comes down and people have a bit more disposable
05:44income to be able to further pay down debt if they choose to.
05:49Dr. Susan Stone, Chair of Economics at the University of South Australia. Thanks so much
05:53for speaking with us.