Australian mortgage holders can expect more rate cuts in 2025 with inflation now back within the Reserve Bank’s target.
Headline inflation remained at 2.5 per cent in January with this figure factoring in the federal government’s $300 electricity rebate.
Underlying inflation without this subsidy was slightly higher at 2.7 per cent.
Both inflation measures for January showed prices within the RBA’s two to three per cent target, justifying its decision this month to cut interest rates for the first time since November 2020.
Governor Michele Bullock, however, was reluctant to suggest more rate cuts are coming, even though Westpac and the Commonwealth Bank are both expecting three more rate cuts in 2025 that would take the RBA cash rate from 4.1 per cent now to 3.35 per cent.
The RBA earlier this month released new forecasts showing headline inflation, also known as the consumer price index, soaring back to 3.7 per cent by the end of 2025, following the expiry of Labor’s $300 electricity rebates.
The last $75 quarterly subsidies are being paid to electricity providers in April.
Treasurer Jim Chalmers is due to deliver his fourth Budget on March 25 ahead of the next election, which means Labor could continue the electricity rebates to keep inflation down.
Australian mortgage holders can expected more rate cuts with inflation now back within the Reserve Bank’s target
Electricity prices fell by 11.5 per cent in the year to January, making it by far the biggest decrease in the Australian Bureau of Statistics figures.
Petrol prices were 1.9 per cent cheaper with unleaded fuel across western Sydney low selling for less than $1.85 a litre.
Tobacco had the biggest annual increase of 12.6 per cent, with cigarette excise indexed in line with average weekly salaries in September on top of a five per cent increase in customs duty.
Rents went up by 5.8 per cent in a sign an immigration slowdown is yet to translate into a substantial easing in housing costs.
