RBA lifts interest rates with more pain likely
Mortgage holders will be feeling the squeeze this Christmas with the Reserve Bank delivering another 25-basis-point interest rate hike and alluding to more increases to come.
Photo: Paul Miller/AAP
The final interest rate lift for 2022 takes the cash rate to 3.1 per cent – the highest level since 2012 – and marks the eighth hike in a row.
The RBA has been lifting interest rates since May to tackle rising inflation by increasing the cost of borrowing money to cool demand for goods and services.
Governor Philip Lowe said inflation was still too high, lifting 6.9 per cent over the year to October.
“The board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that,” Lowe said in a statement.
The RBA’s target for inflation is a band between two and three per cent.
Despite some speculation that the central bank was approaching the end of its tightening cycle, Lowe again said he expects further interest rate increases but also stressed the Board “is not on a pre-set course”.
“It is closely monitoring the global economy, household spending and wage and price-setting behaviour,” he said, pointing to key sources of uncertainty informing its monetary policy response.
Treasurer Jim Chalmers said households were already suffering, but the full impact of the interest rate hikes would not be immediately felt.
He said that’s why growth is expected to soften next year.
“The Reserve Bank statement today makes it quite clear that they also expect household spending to slow over the period ahead, although the timing and extent of this slowdown is uncertain,” he told reporters in Sydney.
National growth figures will be released on Wednesday.
Shadow treasurer Angus Taylor said the government was failing to tackle inflationary pressures at the source.
“Whether it is their failure to resolve energy price pressures or failing to rein in spending, the inaction of this government is increasing pressure on the budgets of hardworking Australian families,” Taylor said.
The 0.25 percentage point rate hike was broadly expected, with evidence of a tight labour market and decent wages growth building the case for one more hike before the end of the year.
The fact the central bank board does not meet in January also added weight to the December hike as it acts as a natural pause.
For mortgage holders with variable rate loans, the 25 basis point lift will ratchet up their monthly repayments.
Numbers crunched by RateCity show repayments have increased by $1251 since May for the average $750,000 loan with 25 years remaining.
-AAP
