Borrowers may ‘need to tough it out’: Koch

Compare the Market’s economic director David “Kochie” Koch has predicted that households will continue to feel an “immense amount of pressure” throughout 2024.

The Reserve Bank of Australia (RBA) increased the official cash rate a total of five times throughout 2023, closing out the year with the cash rate at 4.35 per cent.

“The good news is, it’s not going to get much worse – if you can call that good news,” Mr Koch said.

“Australian borrowers deserve better after the RBA suggested there would be no rate hikes until 2024. How wrong they were!

“Thankfully, they’re making a number of changes, which I think are going to lead to better decisions and greater transparency.”

Mr Koch stated that he believes interest rates to have hit their peak and that inflation will come down “pretty rapidly”, however, interest rate cuts are still a long way away.

“There’s one date that’s vital for borrowers to put into their diary – the 31st of January is when the Consumer Price Index data comes out. That will be a real clear indicator of where inflation is heading,” Mr Koch said.

“Unfortunately, cash-strapped borrowers may have to tough it out for at least another six to nine months before there’s any relief coming through.”

The changes that Mr Koch mentioned include the RBA’s changed schedule in 2024, which has cut down the number of monetary policy meetings from 11 to eight, the first of 2024 set to occur in February.

Mr Koch speculated that the change in schedule could allow home owners more time to adjust to rate changes rather than “having hikes in rapid succession like we’ve seen over the past 18 months”.

“The decision-making structure is also going to change: a new nine-member monetary policy board will be set up with six independently appointed experts. These will be people who operate outside the RBA bubble, in the real world who can bring specialist knowledge, insights, and forecasts into the mix,” he added.

In terms of recession, Mr Koch stated he believes Australia will “narrowly” avoid one.

He added that the country is at “an economic tipping point” with persistently high inflation and an increasing number of companies downsizing staff.

“But property prices are still pretty solid, which makes us feel rich and our record migration numbers are boosting retail sales,” Mr Koch said.

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