Before the central bank is predicted to start easing its policy tightening back, one more excessive rate increase is widely anticipated.
In an effort to control inflation, the Reserve Bank of Australia has aggressively increased interest rates from historically low levels to 2.35 percent since May.
RateCity study reveals that a 0.50 percentage point increase would increase the average borrower’s repayments by $760 in comparison to May as a result of the rate increases.
The RBA shadow board is firmly in favor of another rate rise given that core inflation is now at 4.9%, which is still much higher than the RBA’s goal range of two to three percent.
The shadow board of the Australian National University suggested a 50 basis point increase rather than a more modest 25 basis point increase.
The labor market is still tight, and company confidence is usually strong, according to the RBA shadow board, which said that the domestic outlook remained positive.
But there are obstacles in the horizon as well: Consumer spending is predicted to begin to suffer from rising interest rates, and the state of the world is becoming worse.
The shadow board warned that “widespread downturns are expected,” adding that “a recession in Europe is considered as a near inevitability,” particularly as the demand for natural gas rises as winter approaches.
Jim Chalmers, the treasurer, is likewise worried about the state of the world.
According to him, “the risks of a recession have pushed over from conceivable to likely in several of the big economies that we follow most carefully.” he told The Australian Financial Review.
So, by no means are we out of the woods in terms of the expense of living.
Despite the fact that the government’s finances seem to be doing better than planned, shadow treasurer Angus Taylor admonished the treasury to maintain spending restraint in the forthcoming budget.
Is he going to mess it up? Will he really spend that much? If he does, Mr. Taylor said, he would increase interest rates and cause inflation to soar.
The RBA shadow board is firmly in favor of another rate rise given that core inflation is now at 4.9%, which is still much higher than the RBA’s goal range of two to three percent.
In addition to a “bread and butter” budget, Dr. Chalmers has promised to provide some targeted cost-of-living assistance in industries like healthcare and child care.
There is little consensus on how high rates will increase given the uncertain environment.
The cash rate is predicted by the two major banks to reach its highest point in February of the next year at 3.60 percent by Westpac and 2.85 percent by the Commonwealth Bank of Australia.
The 3.10 percent peak is predicted by NAB analysts, while the 3.35 percent high point is predicted by ANZ.
Even though there will probably be additional rate increases, many anticipate that the RBA will soon let up on the gas.
Shane Oliver of AMP Capital said that the RBA should be “slowing the pace of rate rises” after five consecutive increases so that it may “evaluate the effect of rate hikes to date and allow for monetary policy delays.”
The S&P Global manufacturing purchasing managers index, however, decreased marginally in September from 53.8 to 53.5.
Additionally, the yearly rate of inflation increased slightly, from 4.9% to 5.0%, according to the Melbourne Institute’s inflation gauge.