The Reserve Bank of Australia could deliver multiple rate hikes to try and stop a \u201crunaway train\u201d of entrenched inflation, economists have warned ahead of tomorrow\u2019s meeting.<\/p>\n
Swinburne economist Professor Abbas Valadkhani said he expected the cash rate to lift to 4.35 per cent from 4.1 per cent, as the RBA moves to strangle fresh inflation pressures from the Iran War and global energy shock.<\/p>\n
Last week, the Australian Bureau of Statistics revealed annual headline inflation had jumped to 4.6 per cent, well above the central bank\u2019s target band of 2-3 per cent.<\/p>\n
Mr Valadkhani warned Aussie households could be hit with \u201cmultiple\u201d hikes going forward if inflation becomes \u201centrenched\u201d.<\/p>\n
\u201cIf inflation is entrenched, we are in trouble,\u201d he said. <\/p>\n
\u201cIf the conflict in the Strait of Hormuz and the Persian Gulf continues and if the price of oil stays above US$100 for a long period of time, inflation will be entrenched.<\/p>\n
\u201cThen, we are not dealing with energy driven inflation, it will spread to wages over time, it will spread to services inflation.<\/p>\n
\u201cThat\u2019s when we will be in the biggest dilemma \u2026 it\u2019s very challenging to bring it down, unless we have multiple rate rises.\u201d<\/p>\n
In that scenario, he said Australia could enter a recession.<\/p>\n
\u201cOnce inflation gets entrenched, it\u2019s like a runaway train,\u201d he said. <\/p>\n
\u201cIt\u2019s very difficult to bring it down with one hike, or two hikes, or three hikes \u2026 they (the RBA) hope that the conflict in the Middle East is coming to an end very soon, otherwise we will be all in big trouble.\u201d<\/p>\n
The RBA has lifted rates twice this year and a hike tomorrow would mark its third hike, wiping out the three cuts it delivered across 2025. <\/p>\n
Ray White economist Nerida Consibee also expects a rate hike tomorrow and more to come this year.<\/p>\n
\u201cThe big uncertainty is around how much increased fuel costs are crushing the rest of the economy,\u201d she said. <\/p>\n
\u201cThat\u2019s the bit that is really hard to work out because inflation at the moment is really being driven by things that are not easily controlled by monetary policy (interest rate increases or decreases) but at the same time the RBA can\u2019t sit on their hands and do nothing.\u201d<\/p>\n
The big banks also expect mortgage holders to be slugged tomorrow.<\/p>\n
NAB CEO Andrew Irvine, speaking on a media call on Monday morning, said the RBA had a \u201cdevilishly difficult job ahead of them\u201d.<\/p>\n
\u201cInflation is running too high and we have to get it under control,\u201d he said.<\/p>\n
\u201cInflation is bad for households and businesses.\u201d<\/p>\n
Westpac chief economist Luci Ellis, meanwhile, said a hike tomorrow was \u201clocked in\u201d and reiterated her \u201cbase case\u201d of \u201ctwo further hikes after May, in June and August\u201d.<\/p>\n
\u201cThe RBA\u2019s experience last year, when underlying inflation popped back up almost immediately after it cut rates, will have nudged some within the RBA to the idea that the cash rate needs to be higher than its previous peak to really get inflation under control,\u201d she said.<\/p>\n
The forecasts come as a new consumer sentiment survey from Finder reveals another hike could push 100,000 mortgage holders into default. <\/p>\n
The survey of 1019 people in April found 3 per cent, extrapolated out to 100,000 borrowers, said they were already \u201con the brink\u201d and could only absorb one more increase.<\/p>\n
\u201cMany Australians are walking a financial tightrope and it wouldn\u2019t take much to tip them over,\u201d Finder money and home loans expert Richard Whitten said. <\/p>\n
\u201cThis research reveals how little buffer many households have left.<\/p>\n
\u201cWhen you consider how persistently high the cost of living has been over many years, it\u2019s no surprise so many borrowers are nearing their limit again.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"The Reserve Bank of Australia could deliver multiple rate hikes to try and stop a \u201crunaway train\u201d of…\n","protected":false},"author":2,"featured_media":649327,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[314125,2095,155857,314127,64,63,689,169,193900,99,14821,314122,9567,86425,314138,265138,314136,314124,314137,314139,260487,314131,314135,9565,314134,270292,240491,5626,179207,14819,314123,229875,115990,314128,314126,314130,673,26504,48664,2041,2067,677,43014,314129,271977,69995,14824,183,314140,284864,314132,670,2614,314133,285864],"class_list":["post-649326","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-abbas-valadkhani","tag-america","tag-andrew-irvine","tag-annual-headline-inflation","tag-au","tag-australia","tag-australia-and-new-zealand","tag-australian-bureau-of-statistics","tag-breaking-point","tag-business","tag-cash-rate","tag-cash-rate-rises","tag-central-bank","tag-chief-economist","tag-duncan-evans","tag-energy-shock","tag-finder-survey","tag-fresh-inflation-pressures","tag-global-energy-shock","tag-home-loans-expert","tag-inflation-fears","tag-inflation-rages","tag-inflation-surges","tag-interest-rate","tag-interest-rate-increases","tag-interest-rate-pain","tag-interest-rate-rises","tag-interest-rates","tag-luci-ellis","tag-michele-bullock","tag-mortgage-breaking-point","tag-mortgage-holders","tag-mortgage-stress","tag-multiple-rate-rises","tag-nerida-conisbee","tag-nerida-consibee","tag-new-south-wales","tag-news-corporation","tag-news-highlights","tag-north-america","tag-northern-america","tag-oceania","tag-rate-hike","tag-rate-hikes-loom","tag-rate-rises","tag-ray-white","tag-rba-board","tag-reserve-bank-of-australia","tag-richard-whitten","tag-sarah-marshall","tag-services-inflation","tag-sydney","tag-united-states-of-america","tag-visited-comparison-site","tag-westpac-banking-corporation"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/649326","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=649326"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/649326\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/649327"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=649326"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=649326"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=649326"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}