'Don't budget for a rate cut' this year, top economist says

Bendigo Bank chief economist David Robertson has warned Australian households, "Don't budget for a rate cut in 2024," after the release of April inflation figures.

Consumer prices grew 3.6 per cent in the 12 months to April, up from a 3.5 per cent rise in March, the Australian Bureau of Statistics reported.

Mr Robertson said the inflation data was unlikely to convince the Reserve Bank board to change the cash rate at its next meeting, on June 18.

"For the RBA to cut rates, they will need to be convinced high inflation is fully contained; and the latest monthly CPI figures unfortunately don't help that perception," he said.

"With both headline CPI and core inflation rising marginally in the April data, this uptick, together with the uncertainty of the impact of state and federal budgets, adds to a 'rates on hold' outlook."

The bank maintains its forecast that the Reserve Bank will begin cutting rates by early 2025.

Mr Robertson's view is echoed by many economists, who are expecting the cash rate to be held at 4.35 per cent at the next meeting.

Independent economist Saul Eslake agreed the cash rate would stay on hold for some time.

"I've had the view since November last year that the Reserve Bank would not start cutting rates until February 2025," he said.

"Unlike some other people, I haven't changed my view as a result of anything that's happened since. Indeed, I kind of feel more confident about it."

Once the Reserve Bank does start cutting rates, it will likely be a gradual decline, Mr Eslake said.

"My guess is that they will be doing it once every three months ... so after CPIs probably," he said.

On that prediction, Mr Eslake anticipates the cash rate could be cut about four times, falling to 3.35 per cent by the end of 2025.

Judo Bank chief economic advisor Warren Hogan has gone against most predictions and forecast a rate rise in 2024.

He said the latest employment data, released on Thursday showing a higher than expected number of new jobs, was "incredibly strong".

Mr Hogan said he anticipated two rate hikes this year, before the Reserve Bank started cutting rates in August 2025.

On the contrary, Mr Robertson said the tightening cycle was "generally behind us".

Mr Eslake agreed a cash rate rise was highly unlikely.

It would take "some kind of shock" that pushed inflation materially higher for the Reserve Bank to raise rates again.

But he said the central bank has intentionally left the door open.

After the Reserve Bank's decision to hold the cash rate in May, governor Michele Bullock said she would not rule out a cash rate rise in the future.

"We don't think we necessarily have to tighten again, but we can't rule it out," she said.

"If we have to, we will."

Mr Eslake said not ruling out a rate rise had almost the same effect as raising it.

"Part of the way monetary policy works is by people's expectations of rate cuts," he said.

"If people were thinking, as the financial markets were telling them at the beginning of this year, that there will be two or three rate cuts this year that would, in a sense, be a stimulus for people to borrow.

"But by talking about the possibility of rates going up, Michelle Bullock has kind of knocked that out."

Separately, a new report said spending bounced back last month, with consumers finding space in their pinched budgets for the odd meal out and inexpensive household goods, such as cosmetics.

The 1.1 per cent increase in Commonwealth Bank of Australia's household spending indicator for the month of May followed a 1 per cent fall in the month prior, with CBA senior economist Belinda Allen highlighting a weak consumer trend overall.

After a weak 2023, household goods have risen 2.8 per cent year-on-year, led by spending on online marketplaces, news agencies, and cosmetic and beauty stores.

"This suggests that consumers are still needing to make spending choices and are prioritising essential purchases," Ms Allen said.