Millions of Aussies brace for fresh interest rate pain as RBA meets today: How much more you could be paying
The Reserve Bank of Australia is likely to raise interest rates today as economics experts warn it could cost homeowners around $1300 in higher repayments over the next 12 months.
The chance of a rate hike on Tuesday is 72 per cent likely according to derivatives trading on the Australian Securities Exchange, with some financial markets expecting the RBA to lift its cash rate target from 3.6 per cent to 3.85 per cent.
If it does so, the RBA will become the only major central bank in the world to reverse course and tighten monetary policy to contain inflation.
The RBA will outline its plans at 2.30pm AEDT on Tuesday.
Macquarie University economics expert Geoff Kingston said the biggest source of inflationary pressure facing Australia was government spending – and that the RBA would need to raise rates twice.
‘I think they will go again, in May, or November, because government spending is so strong,’ he told the Courier Mail.
Analysts at NAB, Citi, RBC Capital Markets, UBS and Barrenjoey Markets have also forecasted a second increase this year.
If banks pass on this hike in full, mortgage holders with an Australian-wide average new home loan of $694,000 would see their monthly repayments increase by $109 to $4025.
RBA Governor Michele Bullock is expected to announce its plans on Tuesday afternoon
Trimmed mean inflation rose 3.3 per cent in December, well above the central bank’s target of 2.5 per cent.
EQ Economics managing director, Warren Hogan, said the ‘only thing’ the RBA could do to get the economy on track is to raise rates.
‘Putting aside the human element of this, purely technically, the RBA has failed to achieve their objectives; they are not doing their job. To be brutally honest about it, they have been egged on by everyone in our community,’ Mr Hogan told Yahoo Finance.
‘Unfortunately, that means that we’re probably going to have to reverse all of the rate cuts from last year and there’s a very real risk that they’ll have to do even more,’ he said.
‘I put forward the simple proposition, if a 4.35 per cent cash rate in 2024 did not get inflation under control, why would we think that it’s going to do that in 2026?’
Mr Hogan said there was a ‘good chance’ the RBA would have to increase rates to 5 per cent but ‘[prayed] they don’t have to go much higher than that.’
More to come.
