Good forecasting economists maintain inflation’s on track to keep falling, which takes pressure off rate rises. But there are two sides of the coin here.

Today I write to you bringing good along with bad news. The bad news is that for the 15 million people who have private health insurance the Albanese Government has granted health funds a 4.4% increase in premiums. The good news is that the 9.8 million Aussies with a home loan mightn’t see another interest rate rise!

Let’s deal with the second news alert first. Following the rate increase earlier this month, just about everyone (including Paul Keating’s galah at the local pet shop) is telling me another rate rise is a certainty. For the record, while it’s highly likely, it will depend on data drops on inflation and unemployment in coming months.

We see the latest job market picture tomorrow. Those praying for no rate rise should hope for unemployment to rise, provided the bad news doesn’t involve you losing your job. Meanwhile, next Wednesday brings the January CPI, which will be an important take on inflation and will send economists into prediction mode about what the RBA will do about rates.

On this subject, The Australian Financial Review’s Cecile Lefort and Daniel Reti surveyed the best forecasting economists of 2025 and the headline was: “Worried about rising rates? Top forecasters say RBA may well be done.”

Named by the AFR as the most accurate economic forecaster for 2025 when at Moody’s Analytics, Katrina Ell, now senior economist at Mastercard, said “price growth in Australia was much better contained than in the past few years when inflation peaked at nearly 8 per cent in 2022.” Ell thinks the CPI is “reversing course” and argues the RBA raised the cash rate “to maintain policy credibility.” I’d add that it was seen as a warning to spenders that if you want to mess with the RBA by pumping up inflation, they will mess with you and raise rates.

Jarden Group’s chief economist Micaela Fuchila, ranked third on the list of best forecasters, is a ‘one and done’ believer when it comes to the RBA’s rate rises. “She believes that rising bond yields and a strong Australian dollar were already doing the heavy lifting to keep inflation between 2.7 per cent and 2.9 per cent,” the AFR team reports.

Of course, where these good forecasting economists could be brought undone is in two areas that hit inflation. First, the interest rate rise might not have a big impact on the big spenders nowadays: Gen X Aussies in their 50s and Baby Boomers. These Aussies have a small or no mortgage on homes that have spiked massively in value.

Second, the impact of cost pressures on inflation, such as the increase in interest rates, the expected 24% rise in power bills this year and now the cost of health insurance is set to rise by more than the inflation rate. The cost of health insurance is 3.8% but the Government is permitting a rise of 4.41%, the biggest hike in eight years.

Why? Health Minister Mark Butler says the cost of medical and hospital services has gone up by 5% in the past financial year. The AFR reports that “Medibank and NIB will raise premiums by 5.1% and 5.47% respectively, according to government figures. Bupa, one of the country’s biggest health funds, will increase premiums by 4.8% while HCF will lift by 2.13%.” This development is bound to escalate the rate at which people switch insurers or coverage policies.

“There are already signs that many cannot afford health cover, with record numbers downgrading to cheaper lower-tier policies,” The AFR’s Michael Smith reported. “A survey of health insurers found that more than 246,000 policies were downgraded in the six months to June 30.”

Offsetting these cost pressures could be the rising Aussie dollar that makes imports like the price of petrol cheaper, but you can’t rely on our buddies at OPEC and the big oil companies to always play ball on the lower oil prices we’re enjoying right now.

Given all these cost pressures on Australian household budgets, if we see another rate rise too soon, I’d expect a slowing economy and rising unemployment to follow. And that would eventually bring inflation back into the 2-3% band the RBA demands.

It’s a case of no pain, no gain, so I hope these good forecasting economists are right that inflation is already on track to keep falling.