According to a recent survey by Finder, Australian homeowners may be facing another financial setback as the Reserve Bank of Australia (RBA) is potentially considering increasing cash rates.
The Finder RBA Cash Rate Survey for this month involved 42 economists and experts sharing their opinions on future cash rate moves and other economic issues.
The survey results revealed that almost 93 per cent, or 39 out of 42 respondents believe that the cash rate will increase on the next RBA meeting on Tuesday, and 86 per cent, or 36 out of 42 predicted a 25 basis points increase, bringing the cash rate to 3.60 per cent in March.
This news could be disappointing for homeowners across the country who are already struggling financially due to the ongoing COVID-19 pandemic. If cash rates increase, homeowners may have to pay higher mortgage repayments, adding to their financial burden amidst rising living costs and limited job opportunities.
The RBA’s decision on Tuesday will significantly impact the country’s financial landscape, and homeowners and investors will closely monitor the outcome. Although it remains unclear how this potential increase in cash rates will affect the broader economy and the housing market, it is apparent that many Australians will be closely watching the situation as it develops.
According to Graham Cooke, head of consumer research at Finder, the current series of rate increases is the most dramatic that many homeowners have experienced in their lifetimes. He noted that the rate hikes have already added approximately $12,000 per year to the average 30-year mortgage, causing 52 per cent of Australians to feel financial stress, with younger Australians being the most affected.
In response to the situation, lenders are coming up with creative ways to retain customers, such as offering cheap broadband or up-front cash, and some are providing discounts of up to 100 basis points to prevent existing customers from switching to other providers. Cooke suggested that customers who their lenders do not offer lower rates should consider refinancing somewhere else.
Matthew Greenwood-Nimmo from the University of Melbourne expressed concern about the high level of inflation and stated that the RBA would be cautious about allowing it to become entrenched. He noted that higher interest rates would help to manage inflation and keep inflation expectations at appropriate levels. Meanwhile, Anthony Waldron from Mortgage Choice predicted another rate rise in March to curb inflation, but said that the rate rise cycle was likely to end soon. More than half of the experts surveyed (55%, 23/42) believe the RBA will hold the cash rate in April.
Graham Cooke emphasized that homeowners deserved a break from the relentless pressure of the rate hikes and that the expectation of a pause in rate rises was the strongest result in several months. However, he also noted that inflation had yet to be calmed, and it remained to be seen how the situation would unfold in the coming months.
According to a recent survey, the majority of experts agree that the Reserve Bank of Australia (RBA) requires reform. Specifically, more than two-thirds of the panel (68 per cent, 23/34) believe that the RBA should release more details of the board’s decision-making to the public. Additionally, just over half of the experts (56 per cent, 19/34) feel that the RBA should provide more explanatory announcements and press conferences.
The CEO of Finder, Graham Cooke, stated that many Australians are frustrated with the RBA as it doesn’t seem to comprehend the financial difficulties some families are experiencing. He noted that the research reveals that 13% of Australian homeowners were late on at least one mortgage repayment in the past six months.
Stephen Miller of GSFM indicated that the main problem is the RBA’s insular culture. He recommended more recruitment from various levels of the private and public sectors to promote healthy internal debate and dissent. Meanwhile, Tim Reardon from HIA suggested that the RBA’s primary issue is a lack of clarity regarding the reason for the rapid and significant rate hikes, despite the known risks of lags.
Here’s what experts are saying:
Stella Huangfu, University of Sydney (Hold): “After nine consecutive cash rate increases, it is time for the RBA to wait and see before they take any further actions. There is strong evidence that the economy has been slowing down already. Unemployment rate starts picking up.”
Evgenia Dechter, UNSW (Hold):“The RBA decision will depend on the current economic indicators. The wage growth data was below expectations. If the monthly CPI will also fall short of expectations, the RBA may choose to hold the cash rate in March.”
Tim Nelson, Griffith University (Hold):“The RBA may wait to see the next set of inflation figures before increasing rates again.”
Matthew Greenwood-Nimmo, University of Melbourne (Increase):“Inflation is unacceptably high and the RBA will be wary of it becoming entrenched. Higher interest rates will help to manage inflation and keep inflation expectations anchored at appropriate levels.”
Tim Reardon, HIA (Increase): “Their past statements.”
Tomasz Wozniak, University of Melbourne (Increase):“My predictive systems for monthly and quarterly data unequivocally indicate further increases in the value of the cash rate by around 18 basis points in March. Moreover, the cash rate will likely increase to about 3.7 or 3.9 per cent by June 2023. However, after that period, the forecasts give contradictory conclusions. Therefore, the arrival of new data will play a decisive role in shaping expectations for the year’s second half.”
Shane Oliver, AMP (Increase):”The RBA has indicated repeatedly over the last few weeks that it expects to increase interest further as inflation remains too high.”
Anthony Waldron, Mortgage Choice (Increase): “I expect the Reserve Bank to raise the cash rate in March in its continued effort to contain inflation, however we are likely nearing the end of this rate rise cycle.”
Andrew Wilson, My Housing Market (Increase): “9 consecutive rate increases have clearly failed to impact still record-high inflation. The RBA has nowhere left to go with rates other than up to follow its policy mandate.”
Peter Munckton, Bank of Queensland (Increase): “The economy is in decent shape and inflation is too high. The RBA has also made it clear there are more rate hikes to come.”
Nicholas Gruen, Lateral Economics (Increase): “It will lift because it is worried about inflation becoming entrenched. However it looks like inflation could come down quite sharply soon given how little has fed into wages, so I think it would make more sense to wait this month.”
Leanne Pilkington, Laing+Simmons (Increase):”Despite all the elevated scrutiny of the RBA’s processes recently, the scene appears set for more rate rises to follow, and with them, more pain for people.”
Mark Crosby, Monash University (Increase): “RBA still indicating more to do to bring inflation under control, so likely to raise at least twice more before next inflation read tells a tale for the next few months.”
Nalini Prasad, UNSW Sydney (Increase): “Underlying measures of inflation are strong. This will likely cause the RBA to lift interest rates until they see some easing in inflation numbers. Interest rates are likely to increase in the near term but by the middle of the year previous increases in interest rates are more likely to be felt in the economy. Wage growth for example, remains subdued despite a tight labour market.”
Craig Emerson, Emerson Economics (Increase):“The RBA seems hellbent on engineering a recession.”
James Morley, The University of Sydney (Increase): “The path of rates depends very much on inflation numbers. The RBA has signalled that it will keep increasing rates based on current projections of inflation. If the Q1 number this week comes in high, it seems guaranteed the RBA will raise until they get a lower number for Q2. Even if the Q1 number is lower than expectations, I believe they will raise rates this round and possibly in April and May until they see other data (like monthly CPI) confirming an easing of inflation.”
Brodie Haupt, WLTH (Increase):“It is almost certain the Reserve Bank will continue to increase the cash rate until the inflation begins to abate.”
Tina Teng, CMC Markets (Increase): “The RBA will likely keep raising interest rates until inflation returns to the 2-3% target level.”
Jonathan Chancellor, The Daily Telegraph (Increase):“It seems the RBA aim of getting inflation down will require another rate rise, and the sooner the better.”
Garry Barrett, University of Sydney (Increase):“Continuing high CPI.”
Noel Whittaker, Queensland University of Technology (Increase):“They have made no secret of the fact they will keep on increasing rates until the inflation target is reached.”
Angela Jackson, Impact Economics and Policy (Increase): “While there is a case for the RBA to hold rates and allow the tightening from 2022 and last month to take effect, their communications indicate they will not hold until they see concrete evidence that the tightening is working.”
Alan Oster, NAB (Increase): “Consumers are still robust and inflation taking too long to get back into the target range.”
Mathew Tiller, LJ Hooker Group (Increase):“Despite early signs that inflation has begun to ease, it remains very high.”
Rich Harvey, Propertybuyer (Increase): “Very clear determination by the RBA that inflation needs to be reduced and they indicated more rises to come. Cost of living pressures are hurting consumers, but this needs to be balanced with inflation eroding purchasing power.”
Mala Raghavan, University of Tasmania (Increase):“Considering that inflation is stubbornly high, the RBA is expected to tighten the monetary policy in March, and these tightening measures could continue till May. Though inflation pressures are easing in retail, recreation and hospitality industries, other sectors like constructions/housing/rentals, fuel and transport costs and food and non-alcoholic beverages, the inflation pressure is expected to persist for a while depending on the uncertain global economic and political environment. The labour market pressure is also likely to ease in some sectors due to the return of international students and foreign workers. In contrast, in other sectors, the labour shortages are still acute, putting pressure on wage costs.”
A/Prof Mark Melatos, School of Economics, University of Sydney (Increase):“Inflation, especially the trimmed mean of the CPI, remains significantly above the RBA’s target band. The RBA is still in catch-up mode with respect to matching their cash rate settings to the inflation reality.”
David Robertson, Bendigo Bank (Increase): “The RBA are close to a pause in rate hikes but appear almost certain to hike 25 basis points in March, before one more hike around May. By then there will be more evidence that inflation has peaked and will slowly but steadily decelerate through the year.”
Dale Gillham, Wealth Within (Increase): “The RBA has made it quite clear they have more rate rises in store. Whilst there are some signs that CPI growth is slowing they are not enough to stem further interest rate rises.”
Jeffrey Sheen, Macquarie University (Increase):“To ensure that inflation expectations continue to fall”
Peter Boehm, Director (Increase): “The RBA has made it pretty clear it intends to increase rates until inflation falls, regardless of the negative impacts further interest rates rises will have on Australian families”
Harry Murphy Cruise, Moody’s Analytics (Increase): “Inflation remains bitingly high, forcing the RBA to keep hiking interest rates. While the worst of the inflation pressures are likely in the rear-view mirror, a meaningful price reprieve is still some time away. As such, we expect consecutive rate hikes at the next two meetings, taking the cash rate to 3.85%. In better news, earlier rate hikes are starting to have an effect: unemployment is lifting, retail sales volumes went backwards in the December quarter and wage rises have been lower than feared. This should keep interest rates under 4%.”
Stephen Halmarick, Commonwealth Bank (Increase):“RBA rhetoric.”
Geoffrey Kingston, Macquarie Business School (Increase):“Continuing heat in the labour market plus continuing fiscal expansion will necessitate further rises.”
Jakob Madsen, University of Western Australia (Increase):“Inertia in inflation. The real interest rate is still negative which is not sustainable and makes little economic sense since it is savings that drive economic progress – not consumption.”
Jason Azzopardi, Resimac (Increase):“Rate rises to continue before RBA start to believe tipping point reached of taming inflation vs sending economy backwards”
Nicholas Frappell, ABC Refinery (Increase):“The RBA is responding to ‘high and broad-based inflation’ and a fairly tight labour market.”
Stephen Miller, GSFM (Increase): “The RBA has been tardy in recognising the magnitude and momentum of inflation and needs to take timely remedial action.”
Sean Langcake, BIS Oxford Economics (Increase): “The RBA have made it abundantly clear that they have not yet finished raising rates. Inflation remains very high, and the RBA is intent on avoiding a ‘price-wage’ spiral where inflation expectations drift upwards and high inflation becomes entrenched. There are few signs this is underway, and by the Governor’s admission this is a low probability possibility – but a very high cost one. We expect the RBA will hike through to May. By that time, data on the real economy will be patchy, warranting a pause in the rate hiking cycle.”
Christine Williams, Smarter Property Investing Pty Ltd (Increase): “Unfortunately the RBA’s formula is out of date, compared to our unemployment at only 3.7 per cent and they are using unemployment as the key factor. They are concerned at the saved monies during Covid, that is now being spent. Therefore my view is the formula is incorrect.”
Michael Yardney, Metropole Property Strategists (Increase): “RBA Governor Philip Lowe is hell bent on getting inflation under control and has signalled a few more interest rate rises.”
Cameron Kusher, REA Group (Increase):“RBA has made it very clear that interest rates need to rise further due to heightened inflation so I expect further increases.”
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