February Observations
Interest Rate Outlook
December quarter inflation came in at the high end of expectations at 7.8%. This almost certainly means the RBA will look to increase rates by at least another .25 basis points in the coming days. This would potentially bring the cash rate to 3.35%. Currently the major banks have forecasts rate peaks of 3.35% to 3.85% by May 2023 but these may be revised upwards given the inflation read.
Whilst there is genuine hope of an interest rate reprieve from the fastest increase in rates in Australian history it is not apparent this will be the case. Those hoping for a drop in 2023 may be waiting until 2024 for some relief.
To give you an idea on how we rank on rates compared to our peers:
- US Interest Rate – 4.75%
- UK Interest Rate – 3.5%
- New Zealand Interest Rate – 3.5%
Inflation Outlook
As mentioned, inflation increased to an annual pace of 7.8% over the December quarter. On 1 February, the RBA told a Senate Select Committee on the Cost of Living that inflation had peaked and that it would begin to ease over the course of this year. Despite this, interest rates are expected to rise and stay higher to ensure that inflation is tamed.
Other notable items
- China has forced some students back to ‘in person’ studies as they may not recognise online only courses, boosting immigration to Australia and flow on effects into workforce and pressure on wages;
- US Fed slows rate rises with a .25 basis point increase however flags further to come
Upcoming Lodgements Dates for February:
- 28 February –Quarterly BAS for December quarter
- 21 February– Monthly IAS for January
