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Mounting mortgage stress is impacting consumer spending as some economists warn there could be a recession in six months.<\/p>\n
Fears are growing that an almost certain interest rate hike on Melbourne Cup day next week could plunge the country into a recession.<\/p>\n
Markets are currently pricing in an 82 per cent chance of a cash rate hike at the next RBA board meeting on Tuesday, a figure that has spiked since ABS data was released this week showing a rise in inflation.<\/p>\n
Another 0.25 per cent hike would push the cash rate to its highest level since 2008, and some economists have become concerned about the affects this may have on the Australian economy.<\/p>\n
MORE: \u2018Asking why\u2019: Aus\u2019 large lender going broke<\/a><\/p>\n A new poll by comparison Finder.com.au of 34 economists and housing market analysts revealed just over a third (35 per cent) said they now think a recession is likely within the next six months.<\/p>\n This was a rise from the 30 per cent predicting a recession last month.<\/p>\n Treasurer Jim Chalmers has come under fire as critics warn high government spending has played a role in sticky inflation. Picture: Martin Ollman<\/p>\n But there was also an air of uncertainty \u2013 10, or 29 per cent, of the experts polled said they were unsure. The panel included university finance professors, investment analysts and bank economists, among others.<\/p>\n Three quarters of the panel agreed that there would be expected a rate hike on Melbourne Cup day.<\/p>\n MORE: What your home will be worth in 2031: all suburbs list<\/a><\/p>\n It follows ABS inflation data released this week showing the RBA\u2019s previous onslaught of rate hikes had yet to result in a meaningful slowing in the rate of inflation.<\/p>\n Underlying inflation, one of the main metrics the RBA uses to determine monetary policy, was 3.5 per cent over September, up from the month before, and well above the 2-3 per cent RBA target.<\/p>\n RBA Governor, Michele Bullock is widely expected by financial markets to announce a November hike. Picture: Martin Ollman<\/p>\n AMP chief economist Shane Oliver said the RBA may well conclude a cash rate increase was worse than the alternative of letting inflation become baked into the economy.<\/p>\n \u201cRBA commentary and guidance has been hawkish and the higher than expected September inflation data, along with ongoing upside risks to inflation, leaves the RBA with little choice but to hike again,\u201d Mr Oliver told the panel.<\/p>\n MORE: Bad news for Aussies who earn under $250k<\/a><\/p>\n Mr Oliver had previously warned about the risk of overtightening, noting that additional rate hikes push the risk of an outright recession materially higher.<\/p>\n Economist Saul Eslake of Corinna Economic Advisory said the RBA may be losing patience in its fight against inflation.<\/p>\n \u201cSenior RBA officials appear to be expressing diminishing tolerance for persistently above target inflation (and conversely, a greater willingness to accept temporarily higher unemployment as a side effect),\u201d he wrote.<\/p>\n Mortgage holders\u2019 ability to absorb further repayment cost increases may be diminishing too, with figures from ratings agency Equifax showing arrears rates were rising among first-home buyers.<\/p>\n<\/p>\n
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