Lowe stated that "the central forecast is for inflation to decline this year and next, to be around 3 per cent in mid-2025. Medium-term inflation expectations remain well anchored, and it is important that this remains the case." However, the Board's priority is to return inflation to the 2–3 per cent target range while keeping the economy stable. Lowe also acknowledged that rate hikes were putting a "painful squeeze" on household budgets and that further economic uncertainty could be expected.
According to Finder, the average monthly repayment on a $604,346 home loan has increased by $1111, from $2697 in April 2022, to $3808 in March 2023. If a predicted cash rate peak of 4.1 per cent does occur, the average monthly repayment will hit $4009, or an annual increase of $15,744.
The Treasurer, Jim Chalmers, has admitted that the latest interest rate rise would "make life harder for many Australians already under the pump." Although Chalmers argued that broken supply chains in Australia and global inflationary pressures had contributed to the high inflation rates, he maintained that the government's job was to take responsibility for the things that it had an influence over.
Finance Brokers Association of Australia's Managing Director Peter White has cautioned that the rate rise would almost certainly not be the last and each rate increase would make things even tougher for households. He also advised struggling homeowners to "act early" and get in contact with their bank or lender sooner rather than later.
Analysts from the big four banks have predicted a peak cash rate of 3.85 to 4.1 per cent, indicating the possibility of one to two further 25 basis point hikes before rates are paused. Westpac Chief Economist, Bill Evans, believes the cash rate will peak at 4.1 per cent after two more rate increases in April and May before coming down in March 2024. ANZ and NAB have made similar predictions, while the Commonwealth Bank is slightly more optimistic, forecasting one more 0.25 per cent increase in April, which will bring the cash rate to 3.85 per cent.
PropTrack Senior Economist Eleanor Creagh believes interest rates are now closer to the peak. She said: "If the Reserve Bank hits pause on its tightening cycle later this year, home prices will likely begin to stabilise as some of the uncertainty buyers have experienced with respect to borrowing capacities and mortgage servicing costs reduces."
In summary, the RBA's decision to raise interest rates for the tenth consecutive time reflects the growing concern over the country's high inflation rates. The rise will have an impact on households, particularly those with variable rate mortgages, with more rate hikes expected in the coming months. While the RBA remains committed to returning inflation to the target range of 2-3%, the path to achieving this remains uncertain, given the various domestic and global factors contributing to the inflation
Published:Wednesday, 8th Mar 2023
Source: Paige Estritori
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