My rate cut prediction + The explosion of million-dollar Aussie homes

Hi everyone,

Before I get into the money news I think you need to know about, I received a lot of feedback from my tribute last newsletter to Warren Buffett, who will retire as chairman of Berkshire Hathaway at the end of the year.

Just to put it in perspective, through his extraordinary investment performance he grew the company’s value by an astonishing 5.5 million per cent since taking the helm in 1965.

Since taking control of what was then a failing textile company, Berkshire’s compounded annual return has been 19.9 per cent - nearly double the S&P 500’s 10.4 per cent over the same period. Investors who bought US$100 of Berkshire stock back in 1965 would be sitting on US$5.5 million today, according to the company’s 2024 annual report.

There’s a lot to get through in this week’s newsletter ahead of the next Reserve Bank Board meeting on Monday and Tuesday. There are a lot of predictions of what they'll do, but I reckon we’ll see a 0.25 per cent cut. They won’t like the hot job market and accelerating wage rises, but they will like inflation getting down to within its target range and the tariff wars settling down to something more reasonable.

In this newsletter:

• Strong jobs growth and higher wages put pressure on rates.

• What will the RBA be thinking in its board meeting?

• Superannuation fund returns bounce back from the market turmoil.

• How many properties are now worth over $1 million? You’ll be surprised.

• The big savings from getting the best home/contents and car insurance deals.

• How to get a bill makeover with me!

• Is pet insurance worth it? Here’s how to find a great deal.

Wow! Extraordinary jobs growth

While economists expected 22,500 new jobs to be created in April, the figure came in at 89,000 - the biggest monthly gain in jobs since February 2024.

Weirdly the unemployment rate was steady at 4.1 per cent because there was a huge increase in the number of women finding jobs.

Most of the job gains were in full-time employment with a huge 59,500 jobs created, the biggest monthly increase in 14 months. While part-time jobs increased by 29,500 positions (the most since December 2024).

Jobs growth seems to be defying all expectations with a staggering 255,300 full-time jobs, and 134,500 part-time, added in just the last 12 months.

Female employment jumped by 65,300 in April - the biggest monthly gain since March 2023. Over the year, female employment has surged by 207,200 jobs, outperforming male job creation of 181,700.

With such a tight jobs market, is it any wonder that wage rises have picked up as employers, both government and private sector, compete for staff.

Aussie wages picked up in the March quarter, led by government-linked and administered (scheduled) pay rises. This growth was also supported by a rise in hiring within the public (government) sector.

Legislated wage rises in childcare and aged care, combined with the implementation of state government Enterprise Bargaining Agreements (EBAs) were the key drivers of the wages rebound in the quarter.

Wages in Australia rose faster than expected in the March quarter, with the Wage Price Index (WPI, excluding bonuses) climbing 0.91 per cent - the strongest quarterly gain since late 2023. That beat market forecasts of a 0.8 per cent increase.

Annual pay growth accelerated to 3.4 per cent in the March quarter - up from 3.22 per cent in the previous quarter.

With a tight jobs market and wages rising faster, the question now is: Is the economy getting bang for its buck - or are labour costs rising faster than productivity?

When the Labor Government was swept back to power, Treasurer Jim Chalmers said a major priority of his was to improve productivity. This chart shows that focus is well and truly needed.

Productivity is a measure of how efficient we are in terms of producing goods and services and, as you can see, we’re well behind the US, although ahead of Europe.

What will the Reserve Bank decide next week?

On Monday and Tuesday next week, the RBA Board will meet to discuss interest rates. It’s likely they’ll decide on a 0.25 per cent cut.

The RBA has always said we need to bring inflation down to the 2-3 per cent target range. The hot jobs market also needs to cool to keep wage rises subdued and the global economic environment needs to be stable. So let’s take a look at how we’re going:

• Inflation to target range? Done.

• Jobs market cooling? As I’ve outlined above, the jobs market is back booming and wage rises are starting to accelerate.

• Global economic environment stable? After all the havoc caused by Trump’s tariff war, markets have largely settled. Many of the major tariff threats are now being scaled back - either through negotiation or because the Trump administration has recognised it may have gone too far. As shown in the graph below, markets had been expecting the RBA to cut rates to 2.75 per cent by the end of the year, amid fears of a global economic downturn. But with conditions stabilising, expectations have shifted: the forecast is now closer to 3.36 per cent by year-end - and could continue to improve.

Bottom line: The RBA should cut official interest rates next week by a quarter per cent. The the outlook for the rest of the year is also looking much better - for now.

Of course, with Trump in the mix, nothing is ever certain. His unpredictability remains a wildcard.

At this moment, though, forecasts of another 4-5 quarter per cent cuts by the end of the year seem a bit too pessimistic.

Superannuation fund returns bounce back

April saw volatility spike as markets reacted to Trump’s on-again, off-again, on-again tariffs. Despite the turmoil, Australia’s superannuation funds posted a small positive return for April, with leading superannuation research house SuperRatings estimating that the median balanced option returned 0.6 per cent.

The median growth option gained an estimated 0.4 per cent for the month, while the median capital stable option is estimated to have gained 0.6 per cent.

Pension returns were similarly subdued over April, with the median balanced pension option gaining an estimated 0.7 per cent. The median capital stable pension option is estimated to have risen by 0.8 per cent over the month while the median growth pension option is estimated to rise 0.7 per cent for the same period.

This month’s returns highlight the value of diversification across investments, which members benefit from through their superannuation. The average balanced option includes approximately 45 per cent in non-share assets, helping funds to reduce losses - or even grow retirement balances even when share markets are down.

Returns have now recovered to where they were at the start of January, so despite four months of ups and downs, most members are still seeing around a 6 per cent return for the financial year to date.

The extraordinary jump in properties valued over $1 million

New research from Cotality (formerly CoreLogic), shows that over a third of homes nationally are now valued at $1 million or more - with that amount of money buying less in the housing market than ever before.

Data going back 10 years shows the proportion of dwellings valued at $1 million or above has risen from 9.7 per cent in April 2015 to 34.4 per cent as of April 2025 - a series high. This includes 19.4 per cent of homes in regional Australia (up from just 0.5 per cent a decade ago), and 41.6 per cent across the combined capital cities (up from 14.3 per cent). Both figures are at record highs.

The trend reflects strong price growth across Australia’s housing market, with values rising 67.3 per cent over the past decade.

Unsurprisingly, Sydney had the highest portion of homes over $1 million, where almost two-thirds of stock are past the million-dollar threshold (64.4 per cent). Only houses with five or more bedrooms had a median value over $1 million in Greater Sydney a decade ago. Now the median house value for all bedroom types is over $1 million, ranging from a median of $1.3 million for a three-bedroom house, to $2 million for a house with five or more bedrooms.

Brisbane had the next highest proportion of homes values at $1 million or more at 40.2 per cent - up from just 2.8 per cent a decade ago. This is the highest increase in the period of any region. Even if Brisbane’s house values rise half the rate that they did in the 2024 calendar year, they would hit $1,010,000 by the end of 2025.

Third in the capital city rankings was Melbourne, where 30.9 per cent of homes have a $1 million plus value. This is down from a high of 33.1 per cent in January 2022 but up from 12.4 per cent of million-dollar homes a decade ago.

Adelaide and Perth followed a similar trajectory to Brisbane, with strong value increases since the pandemic creating a sharp increase in the portion of million-dollar plus homes across these cities.

Adelaide saw million-dollar homes go from 4.2 per cent of the market in March 2020, to 27.8 per cent of homes in April. For Perth, just over a quarter of homes are now $1 million or more, up from 6 per cent in March 2020.

THIS is why you need to fight for a better deal in home and car insurance

Quote prices to insure a typical home and car in Australia’s capital cities have climbed an average of 6.36 per cent - about $256 - in the past six months, according to Compare the Market’s Household Budget Barometer Pulse Report.

The national capital average insurance quote for a typical four-bedroom house increased by $164, up 6.8 per cent from $2,410 to $2,574 since September 2024.

Sydney had the most expensive home and contents quotes, costing an average $3,219.

While home and contents cover remains comparatively cheap in Melbourne and Adelaide, these two cities saw the steepest price increase over the six months, with average quote prices rising 9.68 per cent and 8.73 per cent respectively.

There has been some discounting in Perth where average home and contents quotes were 0.1 per cent cheaper than during the December quarter, following a larger increase of 5.16 per cent between September and December.

While the pace of price growth slowed during the March quarter, local weather events like ex-Tropical Cyclone Alfred, and international disasters like the Los Angeles fires could see costs passed on to consumers later this year.

The repair bills for these major weather events can blow out to billions of dollars, which has an impact on future reinsurance costs, and these are ultimately passed on to consumers through higher premiums.

Insurance costs have been one of the biggest contributors to inflation over the past few years as the rise of natural disasters has been compounded by rising construction and labour costs.

Meanwhile, the average comprehensive car cover quote was up 5.75 per cent... an average increase of $101.

Perth saw the biggest percentage increase in car quotes with a 3.79 per cent increase quarter on quarter, and up 7.28 per cent over the past six months. Sydney saw the greatest price change by dollar value, with $150 added to the average car insurance quote over six months.

It is more important than ever for insurance customers not to be ‘one quote wonders’, and shop around for bigger discounts.

The Compare the Market insurance experts see price gaps of hundreds - sometimes thousands - between quotes from different insurers, so if you’re not impressed with the premium increases you’re seeing, don’t stop there - shop around instead.

In one case, there was a $2,436 price variance between quotes to insure the very same Sydney home in Marsfield. In that case, shopping around for a better deal could mean the difference between taking a holiday or staying at home this year.

In Brisbane's Ferny Grove, there was a $2,276 difference between insurance premiums for the same four-bedroom home.

In Melbourne's Hampton East there was a $2,434 gap between premiums for the same popular car model.

In Sydney's San Souci quote prices for the same four-bedroom home varied as much as $10,181.

It is weird and annoying that different companies can charge different premiums for the same item being insured. Insurance underwriters rate risk differently and they have their own preferences based on the history of claims made before by people who live in your area with similar characteristics.

For example, some insurers may weigh the risk of theft heavily if you park your car on the street while others might be more concerned about how often you use your car and the distance you travel. That's why premiums can differ so dramatically, and it pays to shop around.

Vote with your feet and tell your insurer that you won’t cop unreasonable premium hikes. While Australia’s insurance market remains tightly held by a few big brands, comparing and switching is one way to help drive competition. Remember, insurers want your business. Consistently moving to cheaper offers will incentivise them to keep rates competitive.

Want a bill makeover from me? Apply now for Your Money & Your Life TV

Are you ready to save potentially $1000s on your bills … and maybe pick up a cool $1000? I’m looking for everyday Aussies to appear in my Kochie’s Budget Challenge segment on season four of our Seven Network show, Your Money & Your Life.

Last year, I visited 18 different households across Australia to go through their bills with a fine-tooth comb. We walked through everything from how to negotiate your home loan to comparing to see if you’re on the right deal on your health, car and home insurances.

With the research smarts of our series partner, Compare the Market, we found 10s of $1000s on the table – one family had nearly $9000 of potential savings. Plus, there was a nice little $1000 in cash for those who took part.

I’m looking for more people who’d love to take Kochie’s Budget Challenge. Apply now here and make sure you’re available in June – get in quick!

Is pet insurance worth it?

Recently, a few people have asked me if they can save on pet insurance, or even drop it altogether. I get it, we’re all looking at ways to cut costs right now. But pet insurance is like any other type of insurance; the premiums can add up and have you questioning if it’s worth having - until you need to make a claim.

My advice: make sure your pet insurance meets your furry family member’s needs, without overpaying. Do your homework and if it’s comparatively expensive, it could be time to switch providers.

Here’s a few things to know about pet insurance:

Why insure your pet?

We insure our homes, cars, and health, so why not our pets?

Previous generations would have sent a domestic pet to the proverbial “farm” rather than pay big vet bills. For many of us today, our animal companions are like our kids - and just like human dependents, they can cost us a lot!

I have a friend who’s French bulldog had serious health issues and the vet bills were the equivalent to buying a new car.

When some emergency vet bills can climb into the tens of thousands, pet insurance could mean the difference between keeping or losing a beloved animal.

Pet insurance covers 70-90 per cent of vet bills for sickness, injury, or emergencies. Coverage options include:

• Accident and illness: Covers treatment for illnesses (like cancer) and injuries.

• Routine care: Optional coverage for vet visits, vaccinations, dental care etc

• Accident-only: Covers accidental injuries, the most affordable option.

Pet insurance premiums on the rise

Australia has one of the highest pet ownership rates, with 28.7 million pets - dogs being the most popular. The pet insurance market is worth $1.1 billion and growing at 14 per cent annually.

But with pet insurance premiums increasing by about 20 per cent a year (compared to human health insurance - which recently rose by 3.73 per cent), it can be a financial burden.

Like other general insurance, though, we need to remember pet insurance is risk-related. This means the cost is calculated on ‘risk factors’ such as breed, age, product coverage, claims history and much more.

Consider this: Dogs age faster than humans ... one human year is equivalent to 5.3 dog years. As such, the chance of illness and therefore a claim, increases the older our best mate gets.

Our pets are also not covered by Medicare or the Pharmaceutical Benefits Scheme (PBS) - which subsidises medicines. Their healthcare costs are 100 per cent on us as owners. The good news is with so much provider competition these days, we can and should be savvy consumers.

Crunching numbers

According to Compare the Market, the cost of insuring our furry friends differs greatly across not only ‘risk factors’ but also providers.

For instance, they found a Maltese Cross can be insured for as low as $360 annually, while coverage for the most expensive-to-insure dog breed - a French Bulldog - started at $908.

At $2.50 a day, that’s still less than a cup of coffee. But I also know most people like their daily coffee (me included)! So, here are some pet insurance hacks to save.

8 ways to save on pet insurance

1. Don’t wait: Insure your pet early, ideally within their first year, as this is when most health problems arise. It’s harder to get insurance for pets with pre-existing conditions.

2. Shop around: Premiums vary greatly, and shopping around could save you hundreds - or even thousands - over the years. Compare policies to find the best value. One Compare the Market expert found a nearly $900 annual difference between policies with varying benefits.

3. Read the fine print: Check if your pet’s specific conditions are covered in your policy. Pets with pre-existing conditions won’t be covered by a new policy.

4. Understand the limits: A low-cost policy may be attractive, but owners should make sure that it suits your pet’s needs. For this reason, pay attention to annual limits, sub-limits, coverages, add-ons, and excess (which is the amount you’ll pay when claiming, in addition to the benefit percentage gap).

5. Review your policy: The time to save on pet insurance isn’t just when you take out the policy. Avoid nasty surprises by regularly checking your pet’s policy to ensure that the product is still the right fit for you.

6. Consider a higher excess: You can lower premiums by selecting a higher excess, but this means you’ll pay more in the event of a claim. Consider whether this option suits your needs.

7. Consider adding ‘routine care’: Routine care helps cover some of your pet’s preventative care expenses like vet check-ups, vaccinations, and dental treatment. This can help avoid big surgery and hospitalisation bills later on.

8. Keep your pet healthy: Regular exercise, a healthy diet and other preventative care measures can also help to reduce the likelihood of needing to claim. Plus, you’ll have a healthier pet who will hopefully live a long and happy life.

Pet insurance can provide peace of mind knowing you won’t have to bear the cost alone of unexpected vet bills, but be smart about it. Like all types of insurance, it pays to shop around.