Deloitte predicts RBA will cut interest rates in November as economy beats their forecasts

Deloitte has pushed back its hopes for an interest rate cut while warning the building bubble will get worse before it gets better.

Borrowers will be waiting until November for the Reserve Bank of Australia to lower the cash rate, according to Deloitte’s latest economic outlook.

The big four consultancy said the latest call reflected the central bank’s caution about inflation.

Deloitte has been perpetually dovish on rising prices and the RBA’s interest rate moves, generally arguing against hikes. But the economy has been resilient to that pessimism.

The firm previously signalled rates could fall in September.

Markets have factored in one rate cut by December.

Deloitte said central banks often waited “too long” before cutting rates and looked in the “rearview mirror”.

“Mortgage holders are willing the RBA to ease their monthly repayment pain, while Australians who rent need the rate of dwelling construction to ramp up in order to take the heat out of rental price growth,” the report said.

“Neither group is likely to see their prayers answered for a while yet.”

The quarterly Deloitte outlook said the national economy will grow 1.7 per cent in the 2025 financial year and Western Australia will likely outperform the pack at a 2.2 per cent clip.

The outlook for the second half of 2024 was “more promising”.

The jobless rate has outperformed Deloitte’s forecasts, and the consultancy said the labour market was “surprisingly strong”.

But a lift in unemployment was still expected in coming months, and the level would likely reach 4.6 per cent next financial year.

That would mean more than 100,000 people out of work, Deloitte argued.

The RBA has previously signalled that an unemployment rate of about 4.5 per cent was most likely the lowest sustainable level that would not risk the country again losing control of inflation.

Deloitte Access Economics partner Stephen Smith said fixing Australia’s “housing disaster will take years”.

He said that fix would “unfortunately. . . require higher house prices in the near term”.

“The cost of land, materials and labour will stay at higher levels, while recent insolvency rates suggest builders will need bigger profit margins if they are to deliver the significant lift in dwellings that governments and the community are crying out for,” Mr Smith said.

“In all likelihood, this is a problem that will get quite a lot worse before it gets better.”

Construction workers would need to be drawn from other industries to hit the Federal Government’s target to build 1.2 million homes by 2029, Deloitte said.

Growing the industry’s workforce would also require “strategic thinking” about the “migration mix”.

The dire warning about ongoing pressure in housing follows an extraordinary bubble in the sector pumped up by emergency-low interest rates and historically-high stimulus in 2020.