As the end of the year approaches, there are some major milestones on the horizon before we tick over into 2025.
The 2024 United States Presidential Election is on Tuesday 5 November and is a race where either candidate could be the victor. The Wall Street Journal, CNBC and Forbes have Donald Trump ahead, while Reuters, ABC News America’s 538 polling and the New York Times tip Kamala Harris. Most polls, however, have either candidate only slightly ahead, well within the margin of error.
The implication for Australia and the rest of the Western World is the potential for prolonged economic uncertainty. While long-term data shows there is typically no significant market movement surrounding an election, uncertainty has been known to arise when an incumbent president looks likely to lose office. As Joe Biden is stepping down, America will have a new president either way.
Should Donald Trump win on 5 November, the would-be-president-elect then faces sentencing for falsifying business records just three weeks later. This would be an unprecedented situation for the United States and could have an impact on global markets.
Locally, Queensland has sworn in new Premier David Crisafulli. While it will take some time to see what impact this changing of the guard will have, he has been vocal in the lead up to the election with a range of proposed initiatives and priorities, including:
- Abolishing stamp duty for new homes for first home buyers;
- Reviewing infrastructure plans for the Brisbane Olympics; and
- Building generational infrastructure on the Gold Coast to attract major corporates and supercharge tourism.
Time will tell the priority given to these initiatives and the impact they will have – but they have the potential to impact property markets, development activity and construction activity in Southeast Queensland.
The Reserve Bank of Australia (RBA) will meet for the second last board meeting of the year on 5 November. The big four banks think a rate cut is unlikely at this meeting.
CBA still, albeit conditionally, believes a December cut is on the cards. ANZ and Westpac both think February is likely.
Lastly, in our September update, NAB was committed to its forecast that we wouldn’t see a cut to the cash rate until May 2025. In October, we noted NAB was sticking by its May 2025 forecast, but acknowledged February had begun to look compelling. Now, NAB has formally brought forward its forecast to February 2025.
Despite optimism from the big four banks of a rate cut sooner rather than later as inflation continues to trend lower, the International Monetary Fund’s (IMF) view on inflation is less optimistic on Australia. The IMF, in its October 2024 World Economic Outlook, expects Australia’s headline inflation to sit at 3.6% by the end of 2025. Not only is this a significant upward revision from its April outlook of 2.83%, but it also puts Australia well above the advanced economy median of 2.0% and second highest overall amongst this group (behind only the Slovak Republic).
However, despite the IMF’s forecast, the monthly consumer price index for Australia in September 2024 increased 2.1% year-on-year, which was below market forecasts of 2.4%, as well as August’s reading of 2.7%. The September figure was the lowest since July 2021, marking the second consecutive month inflation has been within the RBA’s target band. The Energy Bill Relief Fund rebate is again propelling inflation lower, meaning there may be a slight rebound in coming months when the effects of this wear off.
The labour market is proving resilient, even as activity has slowed. The September unemployment rate was unchanged from August at 4.1%. Forecasts from Trading Economics have the rate increasing slightly over coming months, prior to stabilising at around 4.5% in mid-2025.
Housing supply and broader construction remains strained. Completions in the September 2024 quarter rose 7.2% on the June 2024 quarter, but continue to track slowly. Commencements in the September quarter fell 1.1%.
