Why the US Fed isn’t a Great Predictor of Australian Interest Rates and What This Means for Queensland Property Investors

Why the US Fed isn’t a Great Predictor of Australian Interest Rates and What This Means for Queensland Property Investors

After a long period of little to no major movements, Interest rates have once again become a hot topic for economists, financial analysts, Queensland Buyers Agents like me, and Australians in general. 

Alongside any discussion of interest rate changes in Australia, especially amongst economists and Australian Buyers Agents, you will often find a discussion of the US Federal Reserve and its rate decisions. 

Just take a look at these examples from the last month: 

Of course, this makes sense at face value.

The Australian and US economies are largely intertwined, and history would suggest that if the United States economy experiences an economic shock, we Australians certainly feel it, as was the case in the Global Financial Crises (GFC)

However, when it comes to Interest Rates, the direct comparison between the Reserve Bank of Australia (RBA) and the United States Federal Reserve (The Fed) has always seemed strange to me.

As a Queensland Buyers Agent who understands the Australian property market inside out, I believe we are comparing apples and oranges.

This is because the mortgage structures and economic landscapes of these countries are quite different, meaning the Fed’s actions are not always a perfect indicator of what might happen down under. 

Let me explain. 

Different Mortgage Structures in the US and Australia

In what has been described as a trait that is “Uniquely American”, a 30-year fixed-rate mortgage is the most common loan structure in the United States.  

This means that for Americans with this style of loan, the interest rate they receive remains constant over the loan’s entire life, providing stability and predictability for borrowers. 

It also means that homeowners with these fixed-rate mortgages (most American homeowners) are largely insulated from the immediate impacts of interest rate changes implemented by the Federal Reserve.  

By comparison, Australia predominantly uses variable-rate mortgages (approximately 70%), where the interest rate can change periodically over the loan.

This means that any change in interest rates by the Reserve Bank of Australia (RBA) directly affects the repayment amounts for Australian mortgage holders such that fluctuations in interest rates have an immediate and tangible impact on the economy, the Australian property market and the Queensland property market more specifically. 

But here’s why this matters to you… 

The US is an Imperfect Indicator

All property investment decisions require some level of market forecasting and analysis, and I think much of the information you’re receiving around rate changes is misinformed, or at least lacks context. 

While the US Federal Reserve’s actions can provide some insights into what might happen here on this side of the Pacific, they are not always perfectly aligned with the Australian context and budding property investors should be aware of this. 

Due to our fixed-rate mortgage prevalence in Australia, the RBA may be hesitant to make the same decisions as the US Fed because of the larger and more immediate impact it would have on Australian households.

This doesn’t mean rate changes in the US should be taken with a grain of salt, the US can be a helpful benchmark.  

It’s just that policymakers and policy predictors need to consider local economic indicators and conditions to understand Australia’s interest rate trajectory and impact fully. 

So what will happen to Australian Interest Rates in 2024?

It’s impossible to say exactly, but here are my thoughts: 

  • With upcoming tax cuts set to take effect in July, I expect a significant boost in household disposable incomes.  
  • While much of this may be used to pay back existing debts, it should lead to at least a notable increase in consumer spending. 


This may take some pressure off of the RBA to stimulate spending and mitigate the need for interest rate cuts this year. Plus, with more money in their pockets, Australians may feel less immediate pressure from the interest rate increases over the past 3-4 years and may decide now is the perfect time to buy their next investment property in Queensland. 

As a result, I expect:  

  • the RBA will adopt a wait-and-see approach before implementing any rate cuts, and 
  • this will likely remain the case even if we see some small rate cuts over in the US. 

What does this mean for Australian property buyers and Australian real estate investors?

Overall, while the US Federal Reserve’s actions are a useful reference, they are not always directly applicable to the Australian context due to structural differences in mortgage structures and economic policies. 

So, not only do I believe it’s time for a more nuanced approach when using changes in the US to forecast Australian property trends, but I also believe we should stop trying to “time the market”. 

As I always say, time in the market is a better strategy than timing the market and I’d love to help make that a reality for you. 

Make smart decisions when buying property in Queensland

Do you want to stay on the cutting edge of market knowledge so that you can buy the right Brisbane, Sunshine Coast or Hervey Bay investment property in 2024?

Worth Property Investing can help. My team and I are passionate about helping you make the right investments to achieve your financial goals and lifestyle aspirations. 

Think of us as your property-buying partner, here to support you in making the ideal property decisions and making the most of Queensland’s booming property market.  

As your trusted, licensed Buyer’s Agents, we do everything from searching, connecting, researching, bidding, negotiating and securing the best investment for you. 

Speak to us today!