Mozo Money Moves: Despite a ‘swift lift’ it looks like RBA cuts are coming

Image of Taylor Swift next to graphics shows spending going down

As the Easter long weekend draws near, we’re back with an early edition of Mozo Money Moves, your weekly personal finance wrap that looks at changes to rates, fees and conditions across key personal finance products.

Today, Mozo announced the winners of the Mozo Experts Choice Awards for Savings and Transactions for 2024, where experts rigorously analysed fees, rates and features of 624 different savings and transaction products from 96 providers.

The Australian Bureau of Statistics (ABS) also released two key datasets this week that signalled a shift in consumer behaviour and suggest that the RBA’s aggressive rate hiking cycle is having the desired effect.

Inflation & Retail Moves

The Monthly Consumer Price Index (CPI) and Retail Trade for February, released this week, gave some insight into two key indicators that the Reserve Bank of Australia (RBA) looks at when deciding whether to move the cash rate - consumer spending and inflation.

The data showed a ‘swift lift’ in retail sales in February, driven by seven sold-out Taylor Swift concerts, however the underlying trend for spending was down, with growth in retail turnover up only 0.1%.

“The retail sales data suggest the RBA’s 13 interest rate hikes are having the desired effect on the economy,” said Peter Marshall, Mozo banking expert.

"Despite a surge in retail spending tied to these major events, the trend shows that overall consumers are spending less on retail items due to the rising cost of living and a ‘higher-for-longer’ rate environment.”

The monthly CPI data further reflected the impact of the RBA rate hikes, as inflation held steady at 3.4%, despite that ‘swift lift’. Housing (+4.6%) and food and non-alcoholic beverages (+3.6%) drove the rise in CPI, and insurance and financial services costs continued to rise at a rapid rate (+8.4%) as weather events push up premiums

Although the annual trimmed mean rose from 3.8% to 3.9% in the year to February, overall the downward trend across most items in the CPI basket suggests the RBA’s next move will be a cut. 

“Housing and essential costs are still on the rise, but overall inflation is moderating and getting closer to the RBA’s target inflation range of between 2-3%. The indicators all point toward a rate cut, the timing of which will likely be determined by the quarterly CPI data which we’ll see at the end of April,” Marshall said.

Home Loan Moves

This week, home loans have seen minimal changes to fixed and variable rate home loans, as most of the fixed rate cuts this month came through in the first couple of weeks of March, which Mozo reported on the week before last

In the variable rate space, the only moves were from Bank of Us, which cut its First Home Guarantee Special Home Loan by 30 bps, while BankFirst made a few cuts and hikes to a number of different variable rate investor loans ranging between 10-30 bps.

This week there were minimal moves in fixed home loan rates, with Police Bank, Coastline Credit Union and QBank cutting some fixed terms by 20-50 bps, while BankFirst bucked the trend by hiking many of its fixed rate terms by 10-20 bps, though these were for investor loans only.

Overall, in March, the trend in Home Loan rate moves has been to cut three year fixed terms, which Mozo expert Peter Marshall says is likely due to banks betting on rate cuts over the next three years, and that fixing a longer-term rate now could see homeowners miss out later.

“There’s a risk with fixing because if there are multiple cash rate cuts this year, fixed rate mortgage holders could be paying much more than homeowners with a variable rate home loan.”

“Banks are very good at setting rates so that they do not lose. This means that those who have rates at 5.69%p.a. now believe that within three years rates will be lower than that - and possibly much lower.”

Mozo Home Loan Insights:

Savings Moves

From SMSF savings accounts, to small business banking, to foreign currency debit cards, Mozo crunched the numbers to find the best of best across savings accounts, everyday bank accounts, and travel money cards as part of the 2024 Mozo Experts Choice Awards for Savings and Transactions.

"Mozo is thrilled to showcase the best-of-the-best in the savings landscape, empowering Australians to make more informed financial decisions to put their hard-earned savings to work," says Marshall, Mozo Experts Choice Awards judge.

“These awards cater to the diverse needs of savers, to ensure everyone can find the right fit for their savings goals.”

High Interest Savings accounts from various banks like AMP Bank, Australian Unity, and Great Southern Bank stood out in the awards for offering some of the highest savings rates in the market. Australian Mutual Bank and Great Southern Bank also received awards for their accounts aimed at kids, teens, and young adults. 

For Term Deposits, Bank Australia, Challenger, and ING were recognized for their competitive interest rates. Goldfields Money was named the Small Business Everyday & Savings Bank of the Year. 

In the Self-Managed Super Fund (SMSF) category, Macquarie, Bank First, and Qudos Bank received awards for their SMSF savings accounts. 

Mozo Savings Insights:

As a part of Mozo’s commitment to making your money count for more, each month we “roundup” the rate changes, key banking trends and money moves in the Australian personal finance market. 

If you’d like to see the analysis in full once it’s released, you can subscribe to receive the Mozo Banking Round Up here.

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