KPMG has reiterated its forecast that the Reserve Bank of Australia (RBA) will begin curing interest rates from February, in response to escalating financial pressures facing Australian households.
Chief economist Dr Brendan Rynne anticipates an initial cut of 25 basis points, followed by four additional reductions, potentially lowering the cash rate to around 3% by early 2026.
Rynne expects the current real cash rate to prove overly restrictive by February, compounded by weak consumer spending “for the foreseeable future”.
He underlined the deteriorating financial conditions for many households, noting that growth in gross disposable income is trailing behind its utilisation.
While Australia may avoid a technical recession, Rynne emphasised that GDP per capita had now declined for six consecutive quarters, reflecting an ongoing fall in living standards.
Rynne added that, “real household disposable income and real household consumption, have also gone backwards in recent quarters, further confirming the challenging economic environment many Australian households and businesses are currently facing.”
The anticipated rate cuts are positioned as a proactive measure by the RBA to alleviate economic strains and bolster spending amidst persistent economic headwinds.
This outlook from KPMG underscores the cautious economic climate prevailing in Australia with monetary policy expected to play a pivotal role in navigating future economic stability.