The only one of the big four banks predicting rates relief before Christmas, CBA's economic team says the "disinflationary process has gathered momentum" in the September quarter.
The Reserve Bank of Australia has been locked in battle with high inflation, keeping interest rates elevated to slow the economy and weigh on prices.
The inflation rate is well down from its peak, but stalling progress over the first half of 2024 has kept the RBA cautiously on the sidelines and not ruling anything in or out on the next cash rate moves.
Commonwealth Bank economists think the RBA will deliver rate relief before Christmas. (Steven Saphore/AAP PHOTOS)
CBA head of Australian economics Gareth Aird is increasingly confident inflation will moderate more quickly than the central bank anticipates and open the door to the first rate cut in December.
The "proof of the inflation pudding" would be in the September quarter consumer price index, he said, due before the next RBA board meeting in November.
"But for us, it's very much a case of so far so good for a firmer disinflationary pulse to be rubber-stamped in the official quarterly inflation report on 30 October," Mr Aird said.
The economist cited the national statistics bureau's August price gauge, showing the trimmed mean sinking to 3.4 per cent - its lowest rate in two-and-a-half years.
Wages have been growing more slowly, based on salaries paid into CBA bank accounts, and advertising for new rentals suggest the red-hot market is starting to cool.
"All of the series we monitor indicate to us that the disinflationary process has gathered momentum over the September quarter," Mr Aird said.
Other experts, including Corinna Economic Advisory's Saul Eslake, maintain interest rates will stay on hold until at least February next year.
By then, the RBA should be comfortable inflation is heading in the right direction, having digested two sets of quarterly consumer price data as well as September quarter national accounts.
Saul Eslake believes the RBA will hold fire on rates until the new year. (Mick Tsikas/AAP PHOTOS)
The latter is key to understanding whether consumers are saving or spending stage three tax relief, which Mr Eslake says is equivalent to roughly two 25 basis point rate cuts.
While the economist has long been predicted a February 2025 start to easing, the United States' oversized 50 basis point cut had Mr Eslake wondering if the RBA might borrow from Federal Reserve's playbook.
"It can be a very effective way of communicating to the public that it's not quite mission accomplished, but we're confident that the mission will be accomplished, and so we're now shifting our focus to avoiding any unnecessary further rise in unemployment," he told AAP.
HSBC economist Paul Bloxham is also of view interest rates are on hold until next year, citing Australia's weak labour productivity growth and government spending influenced by election cycles.
"More public spending may seem like it is preventing the economy from tipping into a recession, but this assumes all else is equal, which it is not," he wrote in a note.
Without the increased public spending, he said interest rates would likely be cut sooner, allowing more relief for mortgage holders and, in turn, supporting more private spending.
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