Australia’s Inflation Story… and What’s Next

Tuesday was Melbourne Cup Day – the race that stops the nation. But while punters watched the track the Reserve Bank of Australia (RBA) made its own move: no change to the cash rate.  Just a steady hand in the long game between inflation and growth.

Across Australia though, many households are still feeling the pinch. Grocery runs, rent and power bills keep biting even as a few prices start to ease. Milk might be cheaper but insurance and housing costs are still heavy hitters. The fight against inflation isn’t over just yet.

What the Market’s Thinking

Markets had been hoping for a rate cut before the year wrapped up but recent data has dashed that. Most expected the RBA to hold and that’s what happened. Now, eyes are on what’s next: when rates might finally shift and which way.

Current forecasts suggest a rate cut could come around mid-2026 once inflation settles comfortably inside the RBA’s 2–3% target. Bond markets are also treading carefully. Short-term yields are holding steady – a sign the tightening cycle’s likely done – while longer yields hint that inflation’s still smouldering beneath the surface.

The Road Ahead

The RBA’s job isn’t easy right now. Wage growth and stubborn service costs could keep inflation sticky. But if global demand slows or supply chains smooth out, prices could cool faster than expected.

It’s a fine balance – and bold moves aren’t on the table. A 2025 rate cut? Not likely.

What This Means for Investors

This phase calls for balance. High rates weigh on interest-sensitive sectors like tech and construction while defensive options – think consumer staples, energy and utilities – tend to hold up better.

For fixed income, shorter bonds or inflation-linked options can help steady your portfolio. And companies with solid cash flow and reliable dividends? They’re the quiet achievers right now.

Stay the Course

The global economy’s still finding its rhythm – juggling post-pandemic recovery, global tensions and unpredictable commodity swings. So, the RBA’s steady hand is sending a clear message: Rate cuts may take time and that’s okay. Sometimes, a calm and measured path is exactly what gets us back to normal. One careful step at a time.

 

 

The opinions expressed in this article are those of the author and do not necessarily reflect the views of Superhero Securities Limited (ABN 96160456315) (AFSL No.430150) or its affiliates.