Bendigo Bank chief economist David Robertson warns an interest rate cut is unlikely in 2024.
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00:00The latest GDP data showed further evidence that the domestic economy continued to decelerate
00:05in the first quarter due to inflated costs, rising tax payments and restrictive interest
00:10rates, although some relief is expected on all those fronts in the new financial year.
00:16Real GDP only rose 0.1% in Q1 and annual growth slowed to just 1.1%, the lowest year-on-year
00:23pace since 2020, while GDP per capita remained negative for the fifth consecutive quarter.
00:30Growth isn't expected to rebound in the second quarter, but from July the Stage 3 tax cuts will
00:35start to support household incomes, and by the end of 2024 inflation should be closer to 3%,
00:42a level we haven't seen since 2021, which will be less of a drag on the economy.
00:47As for rate cuts to support demand, the RBA will need to be convinced that the underlying problem
00:52we have, high inflation, is fully contained, and the latest monthly CPI indicator didn't
00:59help that perception. Both headline CPI and core inflation rose marginally in the April data,
01:05to 3.6 and 4.1%, and while this monthly indicator isn't as important as the quarterly numbers due
01:12in late July, this uptick, together with the uncertainty of the impact of state and federal
01:17budgets, adds to a rates-on-hold outlook. Similarly, uncertainty around how much of
01:23the tax cuts will be saved versus spent doesn't appear consistent with further RBA hikes,
01:29so our long-held view that the RBA will start cutting rates early next year remains unchanged.
01:36Other advanced economies have also seen stubborn inflation.