It’s our goal to manage future risk for anyone with a home or investment loan, we have to pay close attention to global money markets o fall kinds, not just the RBA. The RBA is but one cog turning in the machine that is global banking.

I am a bit blown away right now, maybe a touch confused, and in my mind, things aren’t adding up.

Take these observations for example…

·        Stock Markets in a lot of western nations reached all time high’s this month

·        This Included the Dow Jones! (higher risk assets)

·        Bitcoin is just today, shooting for its all-time high’s again (highest risk assets)

Gold has also made a massive run for it. This one should happen, as it is still the “fall back currency” when there are either war tensions or global conflicts.  

How the hell is this even possible??

We have small businesses struggling, homes are being pressured to spend the majority of their household income on everyday goods and services to keep the family intact.

How are these markets being flooded with new money?? Well, there is a lot more liquidity out there in big money markets than we think.

At home, the RBA are squeezing out the everyday punter, with no signs of letting up. But it is the banks who are telling a different story. Think about this, banks have their ear to the ground in real time. They are observing their customers savings, spending patterns, credit card balances, default rates, and of course, home loan commitments. They are looking at data from today. So they are making moves in anticipation of rates coming down and their cost of funds has already started moving with customer deposits dropping already.

We have seen fixed rate markets plummet for the past 2-3months. This is the eventual destiny of the variable rates. The question is, will it be November, February, or can they push it out as far as April. Given they only meet every two months, they need to be careful with their policy as they only get half the opportunities to make changes.

The RBA governor is suggesting she is going to hold the keys tightly for another 6 months. Yet I don’t think she has a choice… or a clue. I think we go down in February at the latest, otherwise it’s carnage for our people. Until a few weeks ago I was confident that we would have to drop in November, but the government spending is keeping the inflation levels, largely in construction, at insane levels.

Before we give a bit of respect to the RBA for their work that they do, let’s remember when the previous governor promised no significant changes until 2024 and then hit us with 13 rate rises. It comes at them fast and generally they respond too late.

Even then, the fixed rates told the tale as they took off 6months earlier than the variable rates. They have already begun doing that on the way back down which is a beautiful sight to see.

So, what are my calls:

·        Governor wins the battle and keeps rates on hold next week

·        Christmas impacts the CPI and inflation figures and the January 29^th data is skewed

·        RBA looks too far into the rear-view mirror and misses the moment to cut rates in Feb

·        April 2025, we release the March 2025 quarter results and we’re worse than we thought

·        Rate cut policy enters higher velocity to free up more cash amongst the population

So, from here, I think that the best case is we start to change our monetary policy in February. I think by April we realise that it needs to happen a little more aggressively than first thought.  

If you have any questions reach out to sean@ratetracker.com.au and we’ll be happy to chat about it. Fingers crossed some good times are just around the corner!

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