While the Reserve Bank continues to jawbone and claim we will be well into the 2025 calendar year before we see a cut to the official cash rate (OCR), it’s questionable how many people actually believe them.

ANZ economists recently pulled their expectation on the first cut forward from May next year to February and others, such as former BNZ chief economist Tony Alexander, says we’ll see the first cut in November this year.

The 525 basis points (5.25 per cent) of tightening we have seen this cycle is clearly doing what the bank wants.

It’s apparent we have moved to the complete opposite of where we were a couple of years ago when employees were demanding high pay rises to stay on. Now, many are just happy to have a job at a time when others are not so fortunate.

Death Blow

By the time you read this article the first quarter’s GDP numbers will have been released and almost certainly not a pleasant read. Surveys are showing people are planning on cutting spending even further, which is likely to prove the death blow to quite a few businesses already on their knees.

A recent paper from the Reserve Bank does suggest remaining inflation, which is why we have such high interest rates, may dissipate quite quickly as the unemployment rate continues to jump.

So, as written previously, the next cash rate review on July 10 is not likely to mean much as the bank will be waiting to see how inflation numbers settle for the June quarter when the numbers surface on July 17. Just how many more people have lost their jobs will become clear when updated unemployment numbers are released on August 7.

Rates Debate

The Reserve Bank is likely to stay quiet over the next month, but expect to hear commentary volume turned up if the domestic side of inflation (non-tradables) decreases.

In most cases I tend to lean towards the six-month rate still, with many banks offering it on a special in the high six per cent range. This gives borrowers the ability to then look to ride rates as they hopefully drop over the 2025 and 2026 calendar years.

For those of you with significant borrowing you may want to hedge this with different term options in case there are unforeseen events which keep rates higher for longer than expected.