‘Now is not the time to let the purse strings go’ despite waning inflation

RateCity research director, Sally Tindall, said: “This latest round of inflation data is fantastic news.”

“There’s no two ways about it.”

She continued: “The result confirms the worst of Australia’s inflation woes are now well and truly behind us. It’s also further evidence the cash rate is at the peak of this current cycle.”

Acknowledging that after 13 rate hikes from the Reserve Bank of Australia (RBA), borrowers have faced “one of the toughest financial tests of their lives”. She also raised that despite the situation, “some have even managed to build up bigger war chests, ready for what might come next.”

“The latest APRA data shows money in the bank from households hit a new record high in December of $1.45 trillion as many households stay laser-focused on building up bigger buffers in the face of adversity.”

So, where to from here?

Ms Tindall’s advice to borrowers is simple.

“If you’ve got a mortgage, now is not the time to let the purse strings go. Stay on top of your budget, and if you do get relief, in the form of a rate cut or a tax cut, consider bolstering your war chest that little bit further by putting any savings back into your mortgage as extra repayments. It’s a strategy that is likely to deliver in spades in the long term,” she said.

While Ms Tindall said the latest data proposes that “further hikes are now unlikely”, she did warn that the possibility of cash rate cuts may “take a number of months to eventuate”.

That’s because the inflation target of 2 to 3 per cent is “unlikely to get to this finish line by putting the cash rate in reverse anytime soon”.

Forecasting a hold at the next cash rate decision, Ms Tindall said that “all eyes will be on both the statement, and the governor’s press conference, to see what clues she leaves, if any, as to the timing of any future cash rate cuts”.