Australians are being told to brace for another interest rate rise, as they already struggle to keep up with skyrocketing cost-of-living.
The Reserve Bank of Australia is tipped to make history on Tuesday, with expectations the central bank will raise interest rates for the fourth consecutive month.
Economists are predicting the monthly board meeting will result in another half a percentage point hike, which would bring the cash rate to a six-year high of 1.85 per cent.
It would be the first time the RBA has lifted the rates for four consecutive months since the introduction of the 2 to 3 per cent inflation target in 1990.
Inflation reached 6.1 per cent in the last quarter, the fastest annual increase in 21 years.
Prime Minister Anthony Albanese said he recognised the people were doing it “really tough”.
“We are very conscious of the feelings that are out there, that people are doing it tough, and every half a per cent or quarter of a per cent in interest rates means higher payments for people, and that means they are having to make choices about how they get by,” Mr Albanese said.
Treasurer Jim Chalmers said he knew that any rate rise was likely to be frustrating.
“This will make life harder for Australians already struggling with the skyrocketing cost of living,” Dr Chalmers said.
Today’s anticipated rate rise would mean those paying off the average home loan of $500,000 will need to cough up an extra $140 a month.
“That’s $140 people will need to find in their household budgets, at the same time as they’re struggling with electricity prices and prices,” Dr Chalmers said.
“We don’t underestimate or lightly dismiss those pressures.”
The RBA lowered their cash rate to 0.1 per cent at the end of 2020 amid the Covid-19 pandemic.
Governor Philip Lowe said the cash rate would remain at that record low until at least 2024, but the rapid rise in inflation this year – caused in part by Russia’s war in Ukraine and supply chain issues on home soil – has meant the monthly hikes.
The government last month announced an independent review into the RBA as calls mount for Dr Lowe to step down.
Dr Chalmers said Mr Lowe had been transparent about why the bank had been forced to raise rates so much.
“He has been pretty up front in saying that the economic conditions changed faster than they anticipated,” Dr Chalmers said.
“The bank … (is trying) to get a handle on this inflation in our economy.
“(We want) to try to make the economy grow faster without adding to these inflationary pressures.”
Already, the rise in interest rates has pushed house prices down in most major cities, as borrowers stare down the barrel of higher monthly payments.
Last week, the Australia Institute’s chief economist Richard Dennis told NCA NewsWire the RBA was one of the biggest threats to the economy at the moment.
“If we keep increasing interest rates because inflation is higher than we’d like, we might cause a recession,” he said last week.
“Increasing interest rates won’t help us prepare for a slowing global economy … but they might actually further dampen the Australian economy.”
Government Services Minister Bill Shorten said he wanted to see the banks improve the rate of return for deposit holders.
“They are pocketing some of this money through the increased interest rates, and at the very least, the banks should be passing some of that on to deposit holders,” he told the Nine Network.
Dr Chalmers said savers “deserved” higher rates on their savings.
“I would encourage people, if you are being let down by your bank – find a better deal if you can,” he told Channel 7.