Interest rates poised to climb again

The Reserve Bank of Australia board is expected to lift the official cash rates for the fifth month in a row when it meets today.

Sep 06, 2022, updated Sep 06, 2022
Photo supplied.

Photo supplied.

The central bank’s September decision will likely spell higher repayments for mortgage holders, with another interest rate rise broadly anticipated.

Wages growth is weak but with a strong labour market and core inflation sitting at 4.9 per cent – well above the target band of two to three per cent – the Australian National University’s RBA shadow board has little doubt that rates will rise again.

Board chair Timo Henckel says it “strongly advocates” for another rate hike and recommends a 50 basis point lift.

While most economists and analysts expect the central bank to lift rates, some experts surveyed by Finder can see the bank pausing its aggressive tightening next month to see how the market is responding.

Provided banks pass on rate hikes to customers, another interest rate increase this month will lead to higher repayment for variable rate mortgage holders.

For a typical mortgage holder with a $750,000 debt and 25 years to go on their loan, RateCity data shows another 0.5 percentage point hike will see them pay $922 more a month than they were in May before rates started rising.

Rising interest rates and soaring inflation are taking their toll on Australians’ mental health, with frontline services ranking cost of living and personal debt as the biggest risk to suicide rates.

Treasurer Jim Chalmers said another interest rate hike would ramp up costs for people paying off a mortgage.

“Now the task for our government is to do what we responsibly can to help people through these shorter-term challenges, but also to deal with the issues in supply chains, to deal with cost of living where we can, and to build an economy that grows wages and improves living standards over time,” Chalmers said during question time on Monday.

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He said the budget would include initiatives such as cheaper child care and free TAFE that would lower costs for people while stimulating 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, rightly people expected us to respond to the curve balls that were thrown at us in a tumultuous time. We are at the back end of that tumultuous time period and Labor is not responding,” Taylor said.

He said interest rate increases took a while to take effect but would be “flowing through like a tidal wave” by the end of the year.

The Greens urged the RBA to pause rate rises until after the October budget.

“The RBA should hit pause until the October budget to put pressure on the government to rein in corporate profiteering, get wages moving and provide cost of living relief,” Greens economic justice spokesman Nick McKim said.

In May, the central bank began a tightening cycle to rein in fast-rising inflation.

Before that, the official cash rate target sat at the historically low level of 0.1 per cent for 18 months.


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