David Robertson said he believes the first cut to the 4.35% cash rate will come in May 2025 and ruled out any further rate hikes.
Unlike other banks, Bendigo has maintained the view since January that there'll be no cuts in 2024.
Mr Robertson told The Savings Tip Jar podcast that February may also be a possibility, but it depends on inflation and employment data that comes through for the last two quarters of the year.
"For us, with core inflation [currently] at 3.9%, they're a long way from cutting," he said.
"It's a case of how quickly we can get that core rate closer to 3% but on the hike side, we think it's on a sufficiently benign path that they [the RBA] don't need to hike any further."
He also said Australia is currently in "stagflation" with meagre GDP growth and inflation that's uncomfortably high.
Aussie dollar to hit 70 US cents
With Australia expected to be one of the last developed economies to cut its cash rate, Mr Robertson forecasts the Aussie dollar to trend upwards to hit the 70 US cent mark.
Countries with higher interest rates generally see an uptick in their currency values as overseas investors chase higher rates when they're looking to park their cash.
With the US Federal Reserve expected to drop rates in September and other developed economies like Europe, Canada, the UK, and New Zealand already cutting, international demand for the Australian dollar is expected to drive its value higher.
The Australian dollar is currently valued at 67 US cents, up from 65 cents in less than three weeks.
Mr Robertson said a higher Australian dollar is helpful for inflation.
This is because a lower currency value makes imported goods more expensive which, in turn, can fuel domestic inflation.
Mr Robertson said the RBA would be "quite comfortable" if the Australian dollar slowly trended up to around 70 US cents.
Bendigo Bank chief economist David Robertson has maintained the view since January that there'll be no RBA cuts in 2024.
Government handouts "necessary"
Mr Robertson was also supportive of recent government spending including the stage 3 tax cuts which took effect last month and energy rebates.
Some commentators have blamed government spending for working against the central bank's quest to bring inflation to its target range of between 2-3%.
But Mr Roberson said he believed the tax cuts were helping to offset bracket creep and households could use the support with the surge in inflation.
He said his team were of the view that households will save the money rather than spend it.
"It's tough for households. They'll need this money for the home loan and non-discretionary [goods and services] as opposed to using it for discretionary spending," he said.
He pointed out Australia was not alone in seeing significant government spending in recent times.
"I think over half the world's population votes this year and typically elections come with government spending," he said.
"Funny that, so we are seeing fiscal support or fiscal stimulus around the world."
Mr Robertson said it was important to look at what was the underlying cause of inflation which was mainly supply chain disruptions as well as pent up demand, both brought on by the pandemic.
"Yes, fiscal support is probably working against monetary policy but all that's doing, I think, is just delaying the first RBA cut rather than preventing it altogether," he said.
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Image by Pablo Merchan Montes on Unsplash
In-text image supplied by Bendigo Bank
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