Economists announce interest rate hike in August as cost of living rises
The salary outlook will “change rapidly by the middle of 2022” and increase faster than the RBA’s previous forecast, he said. “It’s important to note that the RBA, along with other central banks, has come to look at the COVID disruptions,” he said of Omicron’s latest outbreak.
He predicts the cash rate will hit 1.75% by March 2024, making average monthly mortgage payments hundreds of dollars more expensive.
Prime Minister Scott Morrison recently said that interest rates and petrol prices would rise more than necessary if the coalition lost government. His comments were criticized at the time by Labor Treasurer Jim Chalmers as a fear campaign at a time when petrol prices were already at record highs. Dr Chalmers said there had been times when the RBA and the government seemed to be going in different directions.
Westpac and its subsidiaries St George, Bank of Melbourne and BankSA last week raised fixed rates for home borrowers. A recent analysis by RateCity shows that 17 lenders have raised their fixed rates this year with more variable rates now below 2% than fixed rates.
HSBC chief economist Paul Bloxham said analysts were “prepared” to see a higher-than-expected figure in inflation data, with many Western countries seeing higher-than-expected rises. He predicts an annual growth rate of 3.1% in the December quarter data and an underlying increase of 2.2%.
Rising housing construction costs, food prices, oil prices and transport costs could all boost inflation significantly, he said, although this could be offset by an expected decline in electricity prices, low rents and car prices.
He said the Reserve Bank’s push for 3-4% wage growth could be helped by a tight labor market.
“But even at this rate, it could take some time to generate a broad-based shift in wages, given nearly a decade of conditioning to low wage growth,” Mr Bloxham said, adding that a sharp decline unemployment in 2019 was unsuccessful. in significant wage growth. With borders reopening, he said it could also reduce pressure on the job market.
He said it needed signs of continued wage growth for the RBA to raise rates and that it should go against a norm over the past decade of increases of around 2% a year.
“In short, while we think higher wage growth is coming, it’s likely to take time,” he said. “[We] have an upcoming federal election, a likely second-half government review of the RBA, and the current Omicron outbreak and associated downturn. We think cash rate hikes are likely in 2023, rather than 2022.”
ANZ expects core inflation to hit 2.4% year-on-year, the highest reading since 2014, followed by an acceleration in the first half of 2022. A recent research report from the bank said that a first cash rate change would be in 2024. now “seems untenable” and expects the base case to be an increase in 2023 with this year also a possibility.
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