A number of economists have expressed differing opinions on whether the Reserve Bank of Australia (RBA) should increase, decrease, or hold the official cash rate at its next meeting in May.
According to the latest Finder RBA Cash Rate Survey, out of the 42 economists surveyed, 23 predicted an increase, while 19 forecasted no change. Of those predicting an increase, 21 believe that the RBA will increase the cash rate by 0.25 percentage points to 3.85 per cent, and two predict a 0.15 percentage point rise.
Looking further ahead, 75 per cent of the experts think that the RBA will maintain the cash rate in June, with 32 of the 42 experts predicting no change. The panel’s opinions were divided on the issue of managing inflationary pressures without unduly burdening households. While some experts think that the latest inflation figures will justify a rate increase, others believe that inflation has already peaked and the RBA should keep the rates on hold.
Graham Cooke, head of consumer research at Finder, said it was another divided outcome from the panel. “This month’s result is the tightest we’ve seen since the RBA started hiking the cash rate, highlighting the difficulty of managing inflationary pressures without breaking too many household budgets.
“While it’s anybody’s guess, I think the RBA will likely hold again this month, as there are some indications that the first ten rate rises are only starting to have an effect. The full impact of the new rates may not be felt until later this year,” Cooke said.
Angela Jackson of Impact Economics and Policy said she was expecting a rate increase. “The latest inflation figures will provide enough justification for the RBA board to move again on rates, with services inflation, in particular, likely to weigh heavily on their decision.”
However, Shane Oliver from AMP said it was more likely to hold. “Inflation has now peaked and is falling a bit faster than the RBA expected. “Although it’s a close call, this bolsters the case – along with increasing evidence of slowing growth and a cooling labour market – for the RBA to leave rates on hold in May ahead of an eventual cut in rates to support struggling economic growth from later this year and through 2024,” Oliver said.
Rental crisis looms over Australia
A recent survey by Finder reveals that 86 per cent of experts believe Australia is facing a rental crisis. The lack of available rental properties has put immense pressure on renters, with almost half of them struggling to pay rent in April.
According to Graham Cooke, head of consumer research at Finder, the rental crisis has affected renters just as much as mortgage holders. Renters are facing long queues and steep competition while searching for properties to rent.
Leanne Pilkington from Laing+Simmons added that the undersupply of rental properties had left renters with little to no choice. On the other hand, investors are hesitant to invest in residential properties due to rising mortgage repayments, anti-landlord regulations, and diminished returns.
James Morley from The University of Sydney highlighted that the rental supply is constrained and cannot be adjusted quickly. He attributed the high rental demand to returning migration, including students in higher education.
The rental crisis in Australia has put a severe financial burden on renters, investors, and the real estate industry as a whole.
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