January Observations

Where to next for Interest Rates?

The RBA changed up the format of their monthly meetings this month since the new changes that came in last year.  They will have a meeting over two half days with a press conference to follow. Ms. Bullock stressed that whilst inflation (discussed below) had gone lower than their estimates, it was still not enough to entertain rates coming down. As such the RBA held rates steady again at 4.35%. Despite this commentary, markets are starting to factor in rate cuts as early as May.

There’s talk in the market about major retailers expressing concerns about consumption and whispers hinting at a potential rate cut in August.

Read the detail below around inflation insights to find out more!


Inflation Insights

December CPI sees both the monthly and quarterly release. For the month of December, with the overall annual rate decreased from 4.3% to 3.9%. Major drivers are items such as Rent (7.4%), Insurance (8.4%) and Gas(8.5%), are standing out, driven by supply-side factors such as the energy crisis and housing shortage. The quarterly CPI result, which has more updated prices (yet has lagged results), showed a slowdown in inflation to 4.1% from 5.4% in the September quarter.

With CPI slowing ahead of the RBA’s forecast, there are many calling for rate cuts. ABS data showing the hardest hit by rising costs (including interest) are the younger generation who have mortgages, whilst retirees with no mortgages are not feeling the effects as much.

Other notable items

  • S&P 500 hits record highs mainly driven by tech stocks riding AI wave
  • Bitcoin tops $48k
  • Chinese economy showing a decrease in consumer prices and manufacturing PMI still below 50 (contracting)
  • Higher Australian property listings so far showing resilience in the economy with strong auction clearance rates
  • New laws prohibiting employers contacting employees outside of hours or having to check emails look set to pass Parliament


Upcoming Lodgement Dates for February:

  • 21 February – Lodge and Pay Instalment Activity Statement
  • 28 February – Lodge and Pay Income Tax Returns for Large and Medium entities (except individuals)