July Observations

Interest Rate Outlook

The RBA kept rates on hold at 4.10% at their July meeting. Based on a lower monthly inflation read and some weakness in outlooks of discretionary spend they opted to hold fire this month. However they have flagged another two raises to potentially come given the sticky inflation environment.

The market still is looking for direction for what the terminal rate (where prices are stable and employment considered full) will be.


Inflation Outlook

The monthly CPI indicator annual movement dropped to 5.6% in May, down from 6.8%. This was down on consensus estimates of 6.1% and has caused a rethink on whether interest rates are starting to tame inflation. With some enterprise agreements having upward CPI clauses, wages jumping the most in 11 years and expected energy price increases, there is some fear that inflation will be harder to tame due to this spiral. This may mean a period of higher interest rates longer than expected.

Showing how hard it may be to tame inflation, the movement for the monthly CPI excluding volatile items and holiday travel dropped only slightly to 6.4% in May, down from 6.5% in April. This measure excludes fruit and vegetables, fuel and holiday travel.


Other notable items

  • The minimum wages has been raised by 5.75%
  • Super contributions % from 1 July are now 11%
  • Building sector insolvencies are at a decade high


Upcoming Lodgement Dates for July:

  • 7 July – Employee Share Scheme Statements to Employees
  • 14 July – Single Touch Payroll finalisation declaration is due
  • 28 July – June Quarter BAS is due if not using a tax agent or electronic filing service
  • 28 July – Super contributions for the June Quarter to be received by this date