The good news is that the RBA should keep interest rates on hold next Tuesday at 4.35% and for the foreseeable future. 

There is always a long lag effect for interest rates to properly take effect through the economy. However after 13 RBA rate hikes I think interest rates have finally bitten—the tide has turned.   

I believe the next move in interest rates should be down but don’t expect to see cuts any time soon—probably not until beyond mid 2024 or possibly into early 2025. 

It seems strange to be talking about a top or cuts in interest rates when just 4 weeks ago the RBA was raising. Last month’s quarterly inflation read did give the RBA justification for a hike but I think it was also a case of the new RBA governor seeing an opportunity to stamp her authority on her new role.

Monthly inflation in Australia last week came in lower than expected at 4.9%. 

Likely to also put downward pressure on our inflation is the inflationary story coming out of the USA, UK, Euro zone and Canada where it has recently sunk to encouraging lows. This is already being reflected in a higher $AUD. In time this will wash through and influence prices paid for imported products and services and ultimately impact Australian inflation and interest rates.

Anecdotally I’m starting to hear and see evidence from a number of different directions that tells me 2024 is going to be a tough year. 

• Businesses are reporting slower sales which ties in with retail trade turnover trending down since Aug 2022 and consumer sentiment maintaining record lows for the past 2 years.
• The commercial property market seems to have topped-out due mostly to the challenge of borrowing commercially and affording interest cover ratio covenants.

The next piece of key inflation data in Australia, the quarterly CPI, won’t be out until 31/1/2024. It seems a long time from now but a lot can change between now and then.

Let’s see