March Observations

Interest Rate Outlook

Based on most expectations and persistent inflation, it is quite clear the RBA will look to raise rates at the March meeting on 7 March. This would potentially bring the cash rate to 3.6%. All forecasts have been revised upwards with some now predicting a peak of 4.1%. This would be two .25 basis point raises or potentially one large increase of .5 basis points.

Please see our comment below on January rolling twelve month inflation indicators and Australian December quarter GDP which came in weaker than expected. This means interest rate rises may be working to slow the economy but until inflation is brought to the target of 2-3% any reprieve in interest rates may be delayed.

 

Inflation Outlook and GDP

As mentioned, the monthly CPI annual movement for January rose to 7.4%. This is down from the 8.4% monthly number reported in December and below expectations of 8%. This would suggest that interest rate rises are having an impact on the high inflation the RBA is eagerly trying to tackle.

GDP came in below expectations meaning the economy grew 0.5% in the December quarter compared to 0.7% in the previous quarter and 0.8% forecast. As mentioned above, inflation came in below expectations and the continued balancing act of raising rates and keeping the economy going continues.

 

Other notable items

  • APRA has said they will not change the ‘buffer’ used to assess borrowers for new loans. Some lenders had been calling for these measures to be relaxed so that borrowers could have access to larger loans
  • ATO working from home deductions have been tightened – please note we will put out a separate article on this explaining the new rules
  • New Zealand interest rate rise to 4.75%

 

Upcoming Lodgement Dates for March:

  • 31 March – Lodge tax return for companies and super funds with income over $2 million in the latest year lodged. Payment is also due by this date. Lodge tax return for individuals and trusts whose latest return resulted in a tax liability of $20,000 or more, excluding large and medium trusts. Please note we are applying for extensions for most clients who fit this.
  • 21 March – Monthly IAS for February