The central bank’s decision in September will likely lead to higher repayments for mortgage holders, with another interest rate hike widely expected.
Wage growth is weak, but with a strong labor market and underlying inflation of 4.9% – well above the 2-3% target range – the Australian National University’s RBA shadow board have no doubt that rates will rise again.
Board Chairman Timo Henckel says he “strongly recommends” another rate hike and recommends a 50 basis point increase.
While most economists and analysts expect the central bank to raise rates, some experts polled by Finder may see the bank pausing aggressive tightening next month to see how the market reacts.
Provided banks pass the rate hikes on to customers, another interest rate hike this month will lead to higher repayments for variable rate mortgage holders.
For a typical mortgage holder with $750,000 in debt and 25 years to pay off their loan, RateCity data shows another 0.5 percentage point hike will see them paying $922 more per month than in May before rates start to rise.
Rising interest rates and soaring inflation are weighing on the mental health of Australians, with frontline services ranking the cost of living and personal debt as the biggest risk to suicide rates.
Treasurer Jim Chalmers said another interest rate hike would increase costs for people paying off mortgages.
“Now the task of our government is to do what we can responsibly to help people through these short-term challenges, but also to deal with supply chain issues, to deal with the cost of life where we can and to build an economy. which raises wages and improves living standards over time,” Chalmers said during Question Time on Monday.
He said the budget would include initiatives like cheaper childcare and free TAFE that would cut costs for people while boosting the economy.
Shadow Treasurer Angus Taylor called on the government to implement a comprehensive plan to deal with cost of living pressures.
“When we were in government, people rightly expected us to react to curve balls thrown at us in a tumultuous time. We are at the end of this tumultuous period and Labor is not responding,” Taylor said.
He said the interest rate hikes have been slow to take effect, but will “spill over like a tidal wave” by the end of the year.
The Greens have urged the RBA to hold off on rate hikes until after the October budget.
“The RBA should pause until the October budget to pressure the government to rein in corporate profits, shake up wages and ease the cost of living,” the spokesman said. Greens for Economic Justice, Nick McKim.
In May, the central bank began a tightening cycle to curb the rapid rise in inflation.
Previously, the official cash rate target had remained at an all-time low of 0.1% for 18 months.
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