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Home Loan Experts CEO Alan Hemmings, along with brokers Jonathan Preston and Sheng Ye, discussed the potential outlook for the Australian and global economy as we venture forth into 2025.
In regard to interest rates, Preston expressed doubts about a rate cut in the near future, saying that a rise in interest rates is more likely.
“At the very least, cuts in the near future look very unlikely at this moment,” Preston said.
“You can expect the market to fall if rates go up and cuts are delayed into the second half of the year. One good thing, though, is that a cash rate increase would reset sentiment in our property market.
“Then, if sentiment does change back to the idea that rate cuts are coming in the near future, we will see property take off again.”
Ye, however, had a different outlook, predicting that the Reserve Bank of Australia (RBA) would begin cutting rates as early as February, with a possibility of action aligning with the federal election in May.
“I believe the RBA will act on the rate cut from as early as February, most likely. It could also happen from May, coinciding with federal election time,” Ye said.
“However, the Trump administration in the US will add complexity to this.”
Ye said that the recent drop in the Australian dollar against the US dollar reflects market expectations that Donald Trump’s tariffs will harm the Chinese economy, potentially impacting Australia’s largest export market.
“When the RBA considers the official cash rate reduction, it must consider the lower AUD exchange rate against USD as well. This may delay the decision to cut interest rates,” he added.
Hemmings took a more balanced approach and agreed with some of Preston’s and Ye’s views.
“In terms of interest rates, I am between JP and Sheng. In my opinion, there will be no rate cut early in the year – employment is too high and inflation is still high – but I cannot see rates increasing, particularly when there is a federal election looming. I think if we do see any cuts, they will be later in the year,” he said.
Looking ahead to the property market, Hemmings and Preston both identified Melbourne as the top city for growth in the upcoming year.
Preston said: “Melbourne to be top performer among Australian capital cities. Many may expect Perth to continue, but savvy investors I’m seeing are all calling for Melbourne, so I expect a stampede of buyers for Melbourne in the second half of the year. Prices there vs Perth are low for what you get, in my opinion.”
Hemmings agreed, adding: “Melbourne at the moment is underpriced, it shouldn’t be cheaper than Brisbane.
“There is no doubt the extra taxes on investors have hurt that market. But if prices continue to drop, those additional taxes will stop being a disincentive, especially for savvy investors. I think there is still growth in the Perth market but nowhere near what it has been for the past 18 months.”
As for Sydney, Hemmings said that while Western Sydney remains buoyant, other areas of the city are facing price drops.
“For Sydney, I think it will be a story of many markets,” he said.
“Western Sydney is still buoyant, with vendors not really dropping prices, but what affects price growth in Sydney is the Inner West, Eastern Suburbs and Northern Beaches, which have higher price points, and those prices are dropping. Overall, I think growth will be very low – until we start seeing rate cuts.”
Global factors, including the Australian dollar’s performance and international trade dynamics, have also played a role in shaping these views.
Hemmings said that the recent decline in the Australian dollar meant higher costs for imports, particularly petrol, contributing to inflation.
“Exports become cheaper, though, so this helps growth in Australia, although the Trump tariffs may limit this,” he said.
He also reflected on broader international developments, including the potential impact of the war in Ukraine and the ongoing trade tensions with China: “If Trump issues tariffs, that would be inflationary.”
Locally, Hemmings said that the Australian government’s infrastructure promises leading up to the federal election might have inflationary effects, particularly with projects like the $7 billion allocated for the Bruce Highway in Queensland.
“It will be interesting to see what gets promised on the housing front but I don’t think it matters what gets announced, it has already been left too late to fix housing,” he said.
Preston also shared several additional observations on global trends, including a strong outlook for the US and Chinese economies.
“I expect India to keep booming and to drive the world’s growth over the next few decades, increasing wealth via stocks, property and exporting of highly educated labour,” he said.
He also said that the war in Ukraine might soon come to an end, suggesting that dwindling international funding for Ukraine could result in territory being handed to Russia.
As Australia navigates a complex economic landscape, these experts predict that interest rates, property markets, and global factors will continue to shape the country’s economic future in the year ahead.
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