After a year marked by challenges such as interest rate hikes and the burden of a high cost of living, the economic landscape for 2024 holds promise for Australians. Commonwealth Bank’s Chief Economist, Stephen Halmarick, presented his outlook for the upcoming year, unveiling substantial forecasts.
Halmarick acknowledged that the interest rate increases in 2023 effectively slowed down the economy. Now, there is a notable likelihood of a reversal, with potential cash rate cuts replacing hikes. Despite acknowledging risks and challenges in 2024, including geopolitical uncertainties and the United States presidential election, Halmarick expressed confidence in the overall resilience of the Australian economy.
Commonwealth Bank’s projections anticipate a 75-basis-point reduction in the cash rate, commencing in September, with an additional decrease in the latter half of 2025. Inflation, currently at around 5.4%, is predicted to return to the target range of two to three percent, surpassing Reserve Bank forecasts. The bank foresees an annual inflation rate of three percent by the end of 2024, expecting the Reserve Bank of Australia (RBA) to initiate a modest monetary policy easing cycle from September 2024 onward.
While the Australian economy is experiencing a deceleration in consumer spending and inflation, it is outpacing other nations in terms of the slowdown rate. Despite anticipated employment growth, Halmarick predicts a rise in the unemployment rate to 4.5% by the close of 2024. The challenge lies in achieving the delicate balance of returning inflation to the two percent target without adversely impacting labor markets.