Goldman Sachs sees RBA rate cuts delayed to late 2024

The news: Goldman Sachs has pushed back its expected start date for the RBA's easing cycle, citing a more focused inflation target and the resilience in Australia’s economy as key reasons.

The numbers: Goldman Sachs' chief economist Andrew Boak now expects the RBA to cut rates in the last quarter of 2024, a slight delay from its previous estimate of August 2024. The change comes after recent data showed stronger-than-expected GDP growth of 2.1% in the June quarter, while inflation rose to 5.2% in August.

The context: Boak said economic conditions have remained quite resilient despite a 400 basis points increase in the RBA’s policy rate over the 13 months to June 2023. Activity has remained firmer than expected, the unemployment rate remains at historical lows, and the domestic economy also appears to be navigating the fixed-rate mortgage roll-off in “relatively good shape”, he said. He also cited the likelihood of the RBA targeting inflation to be at the 2.5% midpoint instead of a more flexible 2-3% range as a factor. Boak says there is likely to be one more rate hike by the central bank.