How quickly the year has passed! Let’s cast our minds back to around this time last year.
By the end of 2023, the RBA had raised the cash rate rise five times in the year (from 3.1 per cent to 4.35 per cent) and there was mixed opinion as to where rates were headed next. ( … Sound familiar?)
As is customary, experts were asked to glance into their financial crystal balls and give their best shot at guessing where interest rates were likely to land in 2024 – a commentary perhaps used to assuage public anxieties over future rate shifts.
In December 2023 interest rates were at 4.35 per cent.
Around that time, Westpac group chief economist (and formerly assistant governor at the RBA) Dr Luci Ellis estimated there’d be “one or two” rate cuts by the end of 2024.
Meanwhile, Judo Bank’s Chief Economic Adviser, Warren Hogan – the most accurate forecaster of rates in 2023 – was sounding confident that rates would reach as high as 5.1 per cent by the year’s end.
But if you’d asked economists at ANZ, they reckoned rates would reach a peak of 4.35 per cent this year.
Today, the RBA has announced it’s decision to leave rates on hold (at 4.35 per cent), so it looks like the bankers at ANZ peered into the right crystal ball this time.
The thing with predictions is that they can be inaccurate, pretty good, wildly off the mark, or spot on but the timing’s off.
The key message here is: forecasting is hard. Even for the experts.
So be wary of making financial decisions based on future forecasts – whether it’s coming from the news headlines, social media, or your friend at their end-of-year BBQ.
Instead, align your money with what matters most to you.
If you’d like to speak with a professional adviser about your financial future, call Align Financial on (02) 9913 9995.
