ABC Brisbane. Well, as you know, that heard yesterday, the Reserve Bank used its final
meeting of the year to keep interest rates on hold. The official cash rate remains unchanged
at 4.35%. That means if you’ve got a hefty mortgage that you’re struggling with, no
immediate relief. Think February, May next year sometime, maybe. It’s been 13 months
now since there was no change at all in the settings of the Reserve Bank. So what does
this mean for you and me? Well, Peta Tilse is head of funds management at Natgen. Peta,
given what the RBA didn’t do yesterday, what does that mean for you and me?
Steve, just pointing out first up that what we got out of the RBA is dovish comments,
both in the minutes and the press meeting. And what that means is they’re being a bit
softer, I guess, in terms of how they feel about inflation. So being like a peaceful
little dove. That means also that they’re contemplating interest rate cuts. Now, coming
out of that meeting, market pricing is now showing a 70% probability of a February rate
cut and two rate cuts priced in by the May meeting. ANZ and NAB, I think, are both on
the page that it’s going to happen in May, but it doesn’t mean that people in the money
markets think otherwise. So that’s what’s happening. And now we’re talking about terminal
interest rates finishing up at around about 3.35%. So that’s a whole percent different
to where we are today at 4.35%. So if someone’s got a hefty mortgage sometime
between February and May next year, they can expect a little bit of relief, maybe.
Correct. All right. What is the cost of living at the moment? Inflation. We had GDP data
out the other day and cash rate today where the RBA is looking at inflation. So what does
that mean for what you and I are paying when we buy for a coffee or groceries or something?
So just to recap, inflation last week was 0.8%. That’s actually pretty anemic. While
it’s positive, it’s anemic. It’s the weakest number that we’ve had since the 90s. So excluding
COVID, that is, of course. Business investments are subdued and household spending has dropped
and they’ve increased savings. And what that means is people are banking any of those tax
cuts that they’ve got since July 1. And they’re banking any sort of savings they can when
it comes to energy prices. In terms of good bringing up coffee, first thing in the morning,
Steve, I was actually pondering this the other day as I paid $5 from my coffee, which I really
appreciate from Grace and Dwayne below our building. If you think about what goes into
producing coffee, you need energy, you need wages, and there’s obviously coffee beans
and milk and so forth. Energy prices for businesses sky-high, as we know. They did get a bit of
a rebate, but it’s not a long-term fix. Wages are higher than they were a couple of years ago.
So if I think about my $5 coffee a year ago was $4 and probably two years ago was about $3.50.
So that’s increased 42% from about two or three years ago.
Peta Tilse is head of funds management at Natgen.