Skip to content Skip to sidebar Skip to footer

Tax Talk: Monthly Round up (1)

The latest RBA minutes, discussing their decision to maintain rates, clearly show a shift to a neutral stance on interest rates. Inflation rose 1.0% in the March quarter based on data released from the ABS on Wednesday taking the annual rate of inflation to 3.6%. However, the surprise drop in the monthly unemployment rate to 3.7% in February from January’s 4.1% suggests a potential stabilisation in the labour market, contrary to earlier signs of softening.


This trend was reinforced by March’s employment data, released on 18 April, which showed a 3.8% rate, just 0.1% higher than the previous month. Despite sluggish real GDP growth of 0.2% in the December quarter, the unexpected decline in unemployment has puzzled economists, indicating a disconnection between modest economic expansion and robust labour market figures.


This discrepancy has led to differing views on when the RBA might initiate rate cuts. Moreover, higher-than-anticipated inflation data in the US has sparked discussions on whether Australia will see any rate cuts this year, suggesting inflation could be more persistent than initially assumed.


While upcoming Stage 3 tax cuts effective from July 1 may alleviate cost of living pressures, the concern remains whether this will fuel inflation if consumers opt to spend rather than save the extra income.


Overall, we lean towards the lower GDP figure as a more reliable indicator than the unemployment rate, and we anticipate a gradual decline in inflation, albeit at a slower pace. This trajectory should give the RBA room to consider rate cuts later in the year.

Meanwhile, residential property prices continued their upward trajectory in March, with a national increase of 0.6%, matching February’s rise.

Leave a comment