The last three years have been turbulent for financially savvy Australians, to say the least. 

The pandemic brought a short-lived recession with government handouts helping stem the bleeding.

Next came a surge in inflation, driving the cost of living sky-high.

To curb that surge, the Reserve Bank of Australia began to hike the cash rate, lifting it to an 12 year high of 4.35% as of November 2023.

In the meantime, property values hit an all-time high, household savings tumbled, and the nation entered a per-capita recession.

Looking forward, 2024 could bring about some comparative normalcy, with rates and inflation tipped to fall over the coming 12 months. However, Aussies may soon grapple with some never-before-seen happenings. 

Here is the low-down on what finance nerds (like us at Savings.com.au) can expect in 2024. 

#1. Interest rates tipped to drop

Good news for mortgage holders: The RBA may lower the cash rate, thereby driving interest rates downwards, this year. However, the first cut is probably some way off. 

In the meantime, all eyes will be on the central bank when it next meets in early February. 

Economists at NAB believe the February meeting will bring another rate hike, lifting the cash rate at 4.60%. They also predict inflation will fall to the central bank’s target level by the end of the year, possibly leading it to cut.

Peers at CommBank and Westpac aren’t so sure of another hike, but suggest the decision will largely depend on the upcoming quarterly inflation figures, so keep an eye out for those later this month. 

CommBank believes rates will start falling in September and drop 75 basis points by year’s end. 

ANZ economists, on the other hand, believe we’ve reached the cash rate peak and cuts will follow before the end of the year. Though, the bank hasn’t ruled out the potential for a hike somewhere in between.

As of early January, just 5% of traders forecast the RBA will increase the cash rate next month.

Of course, if interest rates were to fall, those keeping cash in a savings account or shopping for a new term deposit could find they realise lower yields than they do today. 

Read more: RBA minutes suggest 2024 hikes remain on the table

Changes to RBA meetings

RBA watchers will also notice the central bank doing things notably differently in 2024 on the back of an independent review into its operations.

Major changes include a reduction in the number of times the RBA board will meet each year, decreasing from 11 to eight, and an increase in transparency surrounding its decisions.

The board will soon front a press conference after each of its meetings, which would come once every six weeks or so.

This change in operations brings it into line with the likes of the US Federal Reserve, which holds fewer but more lengthy meetings.  

#2. Property market on track for continued buoyancy but slowing growth

House prices climbed through 2023, with CoreLogic’s national home value index lifting 8.1% over the course of the year. 

However, the pace of growth in 2024 will likely be lacklustre, largely thanks to weakening economic conditions.

"The RBA is forecasting a rise in the unemployment rate, we're seeing a subdued pace of growth for GDP, slowing growth in disposable household income and the lowest household saving rate since the GFC at just 1.1%,” CoreLogic head of research Eliza Owen said.

“Combined with an expectation that interest rates could hold higher for longer, households are likely to see their budgets further stretched, and more households may fall into acute financial stress."

So far, such conditions have really only impacted the upper-end of the market but that could change in the coming months.

Though, any wane in price growth could reverse if interest rates were to fall, Ms Owens notes. 

Meanwhile, Domain is tipping an increase in property values in 2024, but not to the same extent as that of 2023.

“What we are forecasting is largely an increase in property price Australia wide into the regional markets as well as across our major capitals,” Domain chief of research Dr Nicola Powell told the Savings Tip Jar podcast. 

“We're expecting Sydney houses to lead price growth next year – we've forecasted between 7% to 9% increase in house prices.”

Domain is also tipping house prices in Brisbane and Adelaide to rise between 7% and 8%, and those in Perth to climb 6% to 7%. On the other hand, Melbourne house prices are expected to fall 2% to 4%. 

Brisbane is forecast to outperform when it comes to growth in unit values, with apartment prices tipped to rise 4% to 6%. 

Rising rental costs are also expected to reach a “tipping point”, Dr Powell said, largely due to households increasing in size and many first home buyers entering the property market. 

Starting gun to sound on building blitz

The Federal Government will cross the starting line on its plan to build 1.2 million new homes in five years come July. 

The Albanese Government announced the plan in its first Federal Budget, initially promising a million homes.

It upped its target and dangled an additional $3 billion carrot in front of states and territories in August, offering them a slice of the bucks if they build more than their fair share. 

#3. Stage 3 tax cuts come into play 

The final stage in the three-part series of tax cuts first put into play in 2019 will come to fruition from 1 July. 

It will shake up Australia’s tax brackets in a big way, as the chart below depicts. 

The changes will likely benefit average income earners.

A person with an $85,000 pre tax income will pay around $18,000 in tax this financial year and just $17,000 next financial year, for instance. 

However, those on higher incomes will receive far greater benefits. 

Take, for example, a person earning $180,000 annually. They might pay around $52,700 of tax this financial year but just $45,600 next financial year. 

The cuts are a response to ‘bracket creep’. That is, people moving into higher tax brackets due to regular wages growth, however in real terms they are behind due to higher inflation and the extra tax.

#4. Aussie workers to realise more superannuation than ever

If you’re earning a wage in Australia, chances are you’re also receiving superannuation contributions from your employer. 

Thanks to the super guarantee, employers have to make payments into employees' superfunds, with the goal of ensuring them a comfortable retirement.

The minimum size of those payments must represent a certain percentage of an employee's wage.

As of early January, that is 11%, having risen in 50 basis point increments every year since 2020. 

Come 1 July, however, employees will receive guaranteed superannuation payments representing 11.5% of their wage.

The planned increases will cease when the super guarantee reaches 12% in 2025.

#5. First home buyers could get an extra boost 

Finally, 2023 could bring good tidings for wishful first home buyers, with the Federal Government’s Help to Buy scheme expected to kick off this year.

The scheme will see the government chipping in on properties for up to 40,000 home buyers, purchasing as much as 40% of their home for them.

Owners won’t have to pay interest on their government’s contribution. However, when it comes time to sell their home, they will have to hand the government a portion of the revenue from the sale equivalent to its stake in the property. 

The equity contribution will max out at 30% of the value of an existing home and 40% of the value of a new home. 

Buyers will also have to have a 2% deposit and continuously meet income restrictions to remain eligible for the scheme. Otherwise, they will be asked to negotiate with their home loan lender to buy the government out of its stake where possible. 

More than 26,000 people also leaned on the Home Guarantee Scheme when purchasing property in the six months since July 2023. 

There are still 18,000 places available under the First Home Guarantee, 5,000 across the Regional First Home Buyer Guarantee, and 4,000 under the Family Home Guarantee, Minister for Housing Julie Collins revealed last week.

The number of places available under the respective guarantees will reset to 35,000, 10,000, and 5,000 as of 1 July. 

... and the rest

Of course, that’s far from all of the financial news wise Aussies should keep an eye on this year.

For instance, support payments and HECS-HELP debts will be subject to indexation, we’ll see another Federal Budget, and the nation may fall into a technical recession.

At Savings.com.au, we look forward to keeping our readers up to date on all that, and plenty more, in 2024.

Image by Melissa Walker Horn on Unsplash.