Rate Hike Risks
Reserve Bank of Australia Considers Raising Cash Rate to 4.6% Amid Inflation Risks
Anonymous
The Reserve Bank of Australia is weighing whether to lift its 4.35% cash rate by 0.25 percentage points to 4.6%, with markets and many economists expecting an increase, though forecasts are not unanimous. Persistent inflation risks—including rising energy costs linked to Middle East conflict and a construction boom straining labor and materials—are complicating the decision. A survey found 39% of mortgage holders were unsure they could manage repayments after another rate rise; some said even one or two increases could make them consider selling their homes. The RBA’s decision will affect borrowers directly, while higher fuel and building costs could also feed through to prices across the broader economy.
Key Points
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The RBA board will decide without a newly updated full economic forecast: those forecasts are released quarterly, with the next due in November. The bank is scheduled to announce its decision at 2:30 p.m., followed by a press conference with Governor Michele Bullock at 3:30 p.m.
2
Macquarie research puts building approvals for residential and non-residential projects at as much as 11% of GDP, a level not seen since 1973. The surge includes data-centre construction as well as housing.
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RBA Assistant Governor Sarah Hunter said the unresolved US-Iran conflict raised concerns about fuel prices and global oil-product flows. Oil had topped US$100 a barrel amid tensions around the Strait of Hormuz, and sustained fuel-cost increases could feed into prices for groceries, manufactured goods and services.
4
In the Money.com.au survey, 9% of mortgage holders said a single 0.25-percentage-point rise would make them seriously consider selling; 20% said it would take two such rises, while 15% said it would take four.
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