Australian economists are predicting that the Reserve Bank is unlikely to raise interest rates following a sluggish quarter of GDP growth. According to Steven Halmarick, the chief economist at CBA, Australia’s economy is experiencing another ‘very soft quarter’ of growth, which all but rules out another interest rate rise despite inflation easing at a slower pace.

CommBank’s household spending index, based on the outlays of about seven million CBA customers, fell 0.3% in February to 141.6 points, indicating a shrink in spending over the summer. This decline occurred despite a surge in spending on concerts, including events by US star Taylor Swift. Spending at music festivals saw a 76% increase from January, while transactions at function and event centers, such as on merchandise, jumped 115%.

However, the increase in hospitality and recreation spending wasn’t sufficient to offset weakness across seven of the 12 categories of the index, reflecting a trend of consumers cutting back, as stated by Halmarick.

Queensland was the only state to report an increase in spending in February 2024, despite not hosting a Taylor Swift concert. Nationally, spending was up 3.5% from a year earlier, roughly in line with inflation.

Halmarick noted that the November interest rate rise by the Reserve Bank started to take effect for many borrowers last month and predicts another very soft quarter for GDP growth. This, combined with the deceleration in inflation, makes CBA increasingly confident that the RBA rate hikes are done and the next move is down.

The RBA board is set to meet for the second time in 2024 next Monday and Tuesday. Financial markets are currently rating a 25 basis-point cut in the cash rate to 4.1% as about a one-in-10 chance.