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Westpac changes cash rate call on the back of slow-moving CPI figures

Eden Radford avatar
Eden Radford
- 4 min read
Westpac changes cash rate call on the back of slow-moving CPI figures

The inflation figures for the March quarter, released today from the ABS, are a timely reminder borrowers cannot bank on an RBA rate cut in 2024.

Data out from the ABS today shows Australia’s annual Consumer Price Index has clocked in at 3.6 per cent for the March quarter, down from 4.1 per cent recorded in the previous quarter and a significant drop from the December quarter 2022 peak of 7.8 per cent.

While Australia is making good progress in the fight against inflation, looking at the results compared to the previous quarter, progress is slowing and now behind market expectations.

The monthly CPI indicator, also released today, shows annual inflation in March ticked up to 3.5 per cent, after three previous months of no change at 3.4 per cent (see table at end).

Westpac pushes first forecasted cash rate cut out to November

Westpac’s economic team have today updated their cash rate forecast, moving the timing of the first cash rate cut to November 2024, in line with the current forecasts from NAB and ANZ, which have not changed.

CBA is now the only big four bank economic team expecting the first cash rate cut to come earlier in the year in September, however, they have said the risk lies with it coming at the following meeting scheduled for November.

Current big four bank cash rate forecasts

May RBA mtgFirst RBA cut
CBAHold at 4.35%Sep-24
WestpacHold at 4.35%Nov-24
NABHold at 4.35%Nov-24
ANZHold at 4.35%Nov-24


Don’t bank on a rate cut before 2025

Economists are divided on the timing and number of RBA rate cuts in 2024, with some predicting as many as three, while others are predicting none.

However, the difference between no rate cuts, and up to three rate cuts, has a huge impact on borrowers, particularly for those with large debts compared to their incomes. research shows someone who has budgeted for three rate cuts this calendar year, but doesn’t see any materialise, could be short as much as $226 a month. This is based on someone with a $500,000 debt and 25 years remaining.

Potential impact of rate cuts on the monthly mortgage repayments

$500,000 debt$1M debt
Number of 0.25%-pt cuts this yearMthly repayments - Dec 2024Change in mthly repaymentsMthly repayments - Dec 2024Change in mthly repayments

Source: Based on an owner-occupier paying principal and interest on the current average variable rate of 6.36 per cent. research director, Sally Tindall, said: “These CPI figures are a timely reminder not to bank on a rate cut before it hits your bank account.”

“While the 13 RBA rate hikes have played a lead role in pushing inflation from the dizzying heights of 7.8 per cent at the end of 2022, down to just 3.6 per cent today, there’s still work to be done,” she said.

“With the monthly CPI indicator now in reverse, after three months of sitting stationary, there are plenty of signs the last leg of this saga could be the longest.

“The RBA won’t be hitting the panic button, and it certainly won’t be reverting back to rate hikes on the back of these inflation figures, however, it will be peeling back every layer of this ABS data to see where the risks lie.

“The last thing the RBA wants to do is cut the cash rate, only to find inflation misbehaves and the Board has to do an about- turn.

“Borrowers banking on a handful of RBA rate cuts this year should shift their focus to making sure they can meet their current mortgage repayments for the remainder of 2024.

“If you want a rate cut, understand that right now, the ball is in your court, not the RBA’s. The banks are still in the mood to negotiate, and you might find you nab your own personal rate cut before the month’s out,” she said.

ABS Consumer Price Index, Australia - annual movement

Quarterly CPIMonthly CPI

Source: ABS Consumer Price Index, Australia. Quarterly CPI and Monthly CPI.

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Product database updated 20 Jun, 2024

This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.