As the sun sets on government rebates, Australian households are bracing for a jolt in their electricity bills. A leading financial institution has sounded the alarm, predicting an 18 per cent surge in electricity costs that will persist until July 2025. This uptick is attributed to the gradual cessation of state government rebates, which have until now cushioned consumers from the full brunt of energy prices.
At YourLifeChoices, we understand that managing household expenses is a top priority for Australians over 50. The prospect of rising electricity costs is more than just a flicker of concern; it’s a pressing issue that could significantly impact your budget and lifestyle.
The Commonwealth Bank of Australia (CBA) has delivered a mixed forecast for mortgage holders. While the bank acknowledges an imminent rise in electricity prices, it remains optimistic that this will not influence the Reserve Bank of Australia’s (RBA) timeline for reducing interest rates.
Stephen Wu, a senior economist at CBA, anticipates that headline inflation will climb to 2.6 per cent with the release of the November figures in early January. This increase is largely due to the anticipated 18 per cent hike in electricity prices, as state rebates are phased out.
‘This configuration of a solid lift in headline CPI but a slightly lower core inflation figure predominantly reflects the inflationary impact of the gradual unwind of the electricity rebates. This unwind will occur through to July 2025, as currently legislated,’ Mr Wu explained.
He pinpointed November as the month when Western Australians will feel the pinch, with the first of two instalments of WA rebates being withdrawn.
Currently, eligible households in WA benefit from a $400 energy bill relief from the state government and an additional $300 from the federal government. However, as these rebates recede, the financial relief they provide will also diminish.
Queenslanders are also on notice, with significant increases expected in the first quarter of 2025 due to the rollback of state rebates. The magnitude of these rebates ending adds a layer of uncertainty to future electricity costs.
Despite these projections, Mr. Wu believes that the RBA’s next rate decision will remain unaffected. He suggests that trimmed mean inflation, a key indicator for the RBA, will fall short of expectations.
‘Our current point estimate is for 0.6 per cent over the quarter or 3.3 per cent for the year with risks firmly skewed to the downside,’ he said. ‘It would not take much to see us revise lower our nowcast for the trimmed mean CPI; we have been quite conservative in our translation of the monthly figures into their quarterly equivalent.’
If inflation dips below the RBA’s target, conditions may be ripe for a rate cut as early as February 2025.
‘Our base case remains for the RBA to commence an easing cycle in February 2025 (i.e. at the next Board meeting). And we look for 100bp of easing over 2025 that would take the cash rate to 3.35 per cent,’ Mr Wu predicted.
The RBA, in a recent statement, acknowledged that inflation remains stubbornly high. To consider a rate adjustment, the board insists on seeing a sustainable decrease in inflation rates.
‘Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance,’ the RBA board stated. However, underlying inflation hovers around 3.5 per cent, still a distance from the 2.5 per cent target midpoint.
RBA forecasts don’t anticipate a return to the target midpoint until 2026. RBA Governor Michele Bullock emphasised the ongoing inflationary pressures and cost-of-living challenges facing Australians.
‘We haven’t had a sustained period of high inflation in Australia for more than 30 years. It’s not familiar to people. But it’s one of the key reasons why people are doing it tough and finding it harder to make ends meet,’ Ms Bullock remarked.
‘The RBA’s job, our mandate is to keep inflation between 2 and 3 per cent and to aim at the midpoint, 2.5 per cent. And we use the cash rate which influences interest rates that households and businesses face, to achieve this by curbing the growth of demand across the economy.’
As we navigate these turbulent financial waters, it’s crucial for Australians, particularly those over 50, to be prepared for the impact of rising electricity costs on their household budgets.
Consider exploring energy-saving measures, reviewing your current electricity plan for potential savings, and staying informed about government assistance programs that may help mitigate these increases.
Share your thoughts and strategies for coping with rising electricity costs. Have you found ways to reduce your energy consumption, or are you considering alternative energy sources? Join the conversation below and let us know how you’re planning to tackle the upcoming changes to your electric bill.
Also read: What your electricity retailer may not want you to know
