Judo Bank boss Warren Hogan declares Reserve Bank will hike interest rates three times this year – and he was right about 2023

The Judo Bank is now forecasting the Reserve Bank will raise interest rates three times in 2024 to levels unseen in 16 years – adding $300 a month to average mortgage repayments.

The bank’s chief economic adviser Warren Hogan predicts the cash rate will climb to 5.1 per cent by Christmas, up from an existing 12-year high of 4.35 per cent. 

Rate rises in August, September and November this year would see the Reserve Bank of Australia cash rate reach a level last seen in December 2008 during the Global Financial Crisis. 

A borrower with an average $600,000 mortgage would see their monthly repayments climb by another $300, following the most aggressive rate rises in a generation. 

Until Wednesday, the likes of the Commonwealth Bank were forecasting three rate cuts in 2024 but higher-than-expected inflation data, released on Wednesday, has made economists re-evaluate their forecasts.

While annual headline inflation in the March quarter fell to 3.6 per cent, an underlying measure of inflation showed prices still surging by 4.4 per cent.

This is well above the Reserve Bank’s 2 to 3 per cent target. 

Mr Hogan, a former chief economist at ANZ, said inflation was higher than the Reserve Bank was expecting, despite most Australian borrowers being on a variable rate mortgage.

‘They were hoping we could do less than the rest of the world because we were more exposed to the nominal channel of monetary policy through variable rate mortgages,’ he told The Australian Financial Review.

‘We just need to now get up to the [cash rate] level that other countries are, at 5 per cent.’

Even with three rate rises, an Australian cash rate at 5.1 per cent would still be lower than New Zealand’s 5.5 per cent, Canada’s 5 per cent and the U.S. level of 5.25 to 5.5 per cent.

Australian borrowers have already endured 13 rate rises in 18 months, between May 2022 and November 2023, and they were already the most aggressive hikes since 1989. 

Mr Hogan is one of the few economists to still be predicting more rate rises and was the only one surveyed by The AFR to predict the RBA cash rate hitting 4.35 per cent.

In November, a month before the Commonwealth Bank updated its forecasts to predict six rate cuts in 2024 and 2025, former Reserve Bank board member Warwick McKibbin was forecasting three more rate hikes.

Three more rate rises means a borrower with an average $600,000 mortgage would see their monthly repayments climb by another $303 to $4,171, up from $3,868.

This would occur as a Commonwealth Bank variable rate edged up to 7.44 per cent, up 75 basis points from 6.69 per cent now for a borrower with a 20 per cent mortgage deposit. 

The 30-day interbank futures market has already ruled out any rate cut in 2024, but Westpac is now forecasting a delayed November rate cut, out from September. 

The higher-than-expected inflation has also led to a rise in government bond yields, suggesting financial markets are gradually pricing in the prospect of possible rate rises in 2024. 

Inflation is rising faster than expected as unemployment remains below 4 per cent, after recently falling to the lowest level in almost 50 years.

‘The RBA wants to retain the employment gains of the pandemic … meaning they are trying to get rid of inflation without net job losses,’ Mr Hogan said.

‘That’s fine, but we are creating jobs still.

‘It looks like we’re wandering off the narrow path, and it’s not playing out to plan.’