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After a year in which Aussies were hampered with interest rate rises and high cost of living pressures, the economic outlook for 2024 could bring some much needed relief.
Commonwealth Bank chief economist Stephen Halmarick shared his projections for the year ahead, announcing a range of big rate forecasts.
Mr Halmarick said interest rate rises in 2023 had the desired effect of slowing down the economy, to a point where there was a high chance things could finally start going the other way, with cash rate cuts instead of hikes.
“Looking ahead, 2024 will have more than its fair share of risks and challenges, particularly geopolitical risks as well as the United States presidential election,” Mr Halmarick said.
“Despite these obstacles, the Australian economy remains in relatively good shape.”
Commonwealth Bank forecasts project the cash rate to fall by 75 basis points, starting in September, with another drop in the second half of 2025.
Inflation, which currently sits at about 5.4 per cent, is tipped to return to the desired range between two to three per cent ahead of Reserve Bank forecasts.
“CBA is forecasting the annual rate of inflation back at three per cent at the end of 2024, well ahead of the RBA’s current forecast and closer to the Commonwealth government’s latest forecast,” he said.
“We also expect the RBA to begin a modest monetary policy easing cycle from September 2024 onwards.”
Mr Halmarick said the Australian economy was slowing at a slower rate than other countries, with a slowdown in consumer spending and a dip in inflation.
“The good news is that the pace of global inflation clearly begun decelerating around mid-2023 and we expect further deceleration in 2024,” he said.
“However, markets will also focus on the balance between returning inflation to two per cent targets, without doing too much damage to labour markets.”
While there is employment growth expected, the unemployment rate- which is the percentage of people officially unemployed in the labour force- is set to move up to 4.5 per cent by the end of 2024, Mr Halmarick believes.
This does not mean more people will lose their jobs, rather that the rate of job growth will be slower than the increase in the working age of the population, the CommBank statement said.
Migration to Australia is also tipped to slow as the availability of housing remains limited and the price of dwellings continues to rise.
Forecasts suggest another five per cent rise in house prices in the coming year, after a 9.6 per cent jump from February 2023.
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