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The global economy is predicted to experience a slowdown in 2024, staying below its usual growth rate. This is attributed to stricter monetary policies in developed nations and a subdued economic forecast for China.
For Australians, the coming period is likely to bring escalated costs, increased interest rates, and a rise in population growth. Concurrently, economic expansion and unemployment rates are expected to decline.
With a change in leadership at the Reserve Bank of Australia (RBA), there was an expectation that interest rate hikes might halt, especially since inflation had been declining from its peak in the December quarter of 2022. Despite these hopes, the RBA announced a further rate increase in November 2023, elevating the official interest rate to 4.35%—a figure not seen since 2011.
The decision to increase rates seems influenced by the monthly Consumer Price Index (CPI) indicator, which climbed to 5.2% in August and further to 5.6% in September. Interestingly, the October figures, released post the November rate hike, showed a decrease in inflation to 4.9%.
Service sector inflation continues to be high, significantly contributing to the unexpected surge in underlying inflation during the September quarter.
The RBA remains vigilant about Australia’s inflation scenario, citing several factors: persistent high inflation in the services sector, earlier than expected recovery in house prices, a tight job market, and population growth driven by immigration.
A poll of 40 economists by the Australian Financial Review indicates a median prediction that the RBA will begin reducing rates in September 2024. The bond market, too, anticipates a reduction in rates by mid-2024.
The RBA will convene only eight times in 2024, down from 11, starting in February. This change follows an independent review ordered by the Treasury. With the RBA governor’s pledge to bring inflation back to the 2-3% target range, additional rate hikes could be forthcoming.
A Roy Morgan survey predicts that holiday shopping during the pre-Christmas sales will see an expenditure of $66.8 billion, a marginal 0.1% increase from 2022, likely due to the impact of living costs.
The expected spending for the Boxing Day period until December 31 is around $9 billion, including $3 billion on Boxing Day. This follows a year of subdued sales, prompting retailers to offer larger discounts.
In 2023, house and unit prices saw a steady increase, with a national growth rate of 5.42% (6.54% in capital cities). Factors driving this include record-high net overseas migration, limited vacant properties, and increased demand for existing homes owing to the construction sector’s capacity and cost challenges.
Experts anticipate this growth trend to persist, as housing demand is expected to continue surpassing supply. Nonetheless, the rising cost of living and uncertainty surrounding interest rates are likely to moderate the pace of price growth compared to previous years.
The rental market, as per SQM Research, faces a critical shortage of available properties. This supply-demand imbalance is expected to drive capital city rental prices up by 7-10% in 2024, following an average 10% increase in 2023.
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