While NAB has stated it will not be raising rates for savings customers at this time, ANZ is giving its ANZ Plus Save account holders a .25% increase to 4%. This move by the Reserve Bank marks the ninth consecutive time the cash rate has gone up, with economists warning that it may reach 4.1% in the near future.
In a statement, Reserve Bank Governor Philip Lowe acknowledged that the hike in interest rates is putting a strain on households, and warned of major uncertainties surrounding Australia's economy. He stated that there are a "range of potential scenarios" and that the full impact of the cumulative increase in interest rates is yet to be felt in mortgage payments.
The rise in interest rates comes as inflation in Australia continues to soar, with the Consumer Price Index reflecting a 7.8% increase year-on-year in December, the largest annual increase since 1990. Governor Lowe stated that the Reserve Bank expects further increases in interest rates will be necessary to ensure inflation returns to target and that this period of high inflation is only temporary.
Economist and lecturer at Monash Business School, Dr Isaac Gross, believes there will most likely be another two to three rate hikes, which would bring the interest rate to 4.1%. He cites the "lift off" in inflation and record-low unemployment rates as reasons for the increase.
Director of Economic Research at PropTrack, Cameron Kusher, has revised his forecast from one final rate hike in March to three more hikes, bringing the interest rate to 4.1% in May 2023. Kusher stated that he was surprised by Governor Lowe's comments and that the board's decision to raise rates higher suggests they believe inflation will not come down to its target rate for some time.
Treasurer Jim Chalmers spoke about the recent rate rise during Question Time in Canberra, stating that it will place "extra pressure" on households and the Australian economy. He said the government has three ways to address inflation and bring down interest rates, including delivering cost of living relief, boosting wages, and addressing supply-side constraints.
In conclusion, the recent hike in the official cash rate by the Reserve Bank of Australia is expected to bring further challenges for households and the economy as a whole. However, with the government's commitment to addressing inflation and reducing the strain on households, it is hoped that the financial landscape will improve in the near future.
