Inflation's Tug of War: Implications for Rate Hikes in August
Inflation's Tug of War: Implications for Rate Hikes in August
2
⚠ The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
With inflation persistently on the rise, Australian homeowners brace for potential interest rate hikes as early as August.
New data from the Australian Bureau of Statistics indicates that inflation remained at a worrisome 4% annually by May 2024, causing increasing concern among economists and the general public alike.
The most dramatic rises were noted in housing (up 5.2%), alcohol and tobacco (up 6.7%), and transportation (up 4.9%). With these figures, inflation has climbed from 3.4% in February to its current position, leading many experts to predict imminent rate adjustments.
This adverse inflation report has prompted many, including Betashares' chief economist David Bassanese, to foresee significant upward pressure on interest rates. "The annual inflation measures have stuck stubbornly around 4%, and this spells trouble for controlling economic stability," noted Bassanese.
For Deutsche Bank, the expectation is clear: a rise in interest rates to around 4.6% is on the cards at the August meeting. Factors compounding the inflation issue include unexpectedly high immigration, significant infrastructure projects, and elevated costs in health and personal services, among others.
Higher costs in housing and basic services.
Continued pressure on energy prices due to climate change.
Failing government policies exacerbating the issue.
Despite weak consumer spending, these entrenched inflation drivers have forced analysts like Bassanese to acknowledge profound systemic failures at both federal and state levels. Adding to these woes, the reluctance of the Reserve Bank of Australia (RBA) to reduce rates anytime soon could see future hikes implemented to combat prolonged inflationary tendencies.
Financial services leader Steve Mickenbecker from Canstar also warned that the RBA is gearing up for potential increases. He argues that with scant indicators of inflation nearing the target range, delaying any hikes would unnecessarily prolong economic pain for borrowers. For instance, a modest rate hike of 0.25% could elevate monthly repayments on a $600,000 home loan by $100.
Furthermore, tax cuts and living cost relief measures set to commence next month may spur further consumer spending, countering the RBA's efforts to restrain household expenses. Moody's Analytics' Harry Murphy Cruise expressed concerns that most household savings will possibly be spent quickly and could intensify inflationary pressures.
Economist Anneke Thompson of CreditorWatch further elaborates that the unprecedented migration levels have driven up demand across non-discretionary services and housing, prompting businesses within these sectors to hike prices. While a slowdown in net migration is anticipated, the impact on broader economic equilibrium will take time.
Meanwhile, KPMG’s chief economist Brendan Rynne believes the RBA may not rush to push rates even higher but predicts they will remain elevated for an extended period. He’s talking about the first significant rate cuts only being feasible by February 2025.
Rynne further correlates Australia's inflation trajectory with the US, which had experienced similar inflation patterns with a slight time lag. Notably, the US saw a biphasic inflation curve - with a resurgence before a subsequent decline, a pattern Australia might similarly follow.
In addressing the broader economic implications, RBA Assistant Governor Chris Kent acknowledged the challenge higher rates pose for families, suggesting that present cash rates are already in restrictive territory. According to Paul Bloxham, HSBC’s chief economist, this assertion aligns with the RBA's wary stance against tightening further while simultaneously achieving economic balance.
Published:Saturday, 29th Jun 2024 Source: Paige Estritori
Please Note: If this information affects you, seek advice from a licensed professional.
The Boating Industry Association (BIA) has recently unveiled a significant initiative aimed at fostering responsible boat ownership across Australia and New Zealand. This campaign, launched during Safe Boating Week 2025, is a collaborative effort under the Australia New Zealand Safe Boating Education Group (ANZSBEG), which includes maritime regulators and peak bodies from both nations. - read more
The Boating Industry Association Ltd (BIA) has issued a compelling appeal to all levels of Australian government, emphasizing the urgent need for strategic support to bolster the nation's esteemed marine manufacturing and recreational boating sector. This call to action arises amidst a significant skills shortage that poses a threat to the industry's economic vitality and growth potential. - read more
The 56th Sydney International On-Water Boat Show recently concluded after four dynamic days at Darling Harbour, drawing over 20,000 visitors and highlighting the latest advancements in marine design and technology. Presented by the Boating Industry Association (BIA) and Mulpha Events, the event featured more than 160 vessels from 120 leading international and Australian marine brands. - read more
The Boating Industry Association Ltd (BIA) has recently issued a compelling appeal to all levels of Australian government, emphasizing the urgent need for strategic support to bolster the nation's esteemed marine manufacturing and recreational boating sector. This call to action arises amidst a significant skills shortage that poses a threat to the industry's economic vitality and growth potential. - read more
At the 2025 Sydney Boat Show, the Boating Industry Association (BIA) unveiled the National Recreational Boating Statement, providing a comprehensive overview of the sector's current status and future projections. This landmark report highlights the substantial economic and social contributions of Australia's marine industry and outlines ambitious growth forecasts leading up to 2030. - read more
In a significant development for Australia's naval defense strategy, the Australian Government has officially selected Japan's New FFM design for its new general-purpose frigate program. This decision marks a pivotal step in enhancing the Royal Australian Navy's capabilities and underscores the strengthening defense collaboration between Australia and Japan. - read more
Having bad credit may make it seem challenging to secure a boat loan, as it can negatively impact your creditworthiness in the eyes of lenders. However, it's not impossible to get approved for a boat loan even with bad credit. - read more
Imagine the spray of the sea caressing your face, the horizon stretching infinitely ahead, and the sense of freedom that sailing on your own boat provides. Owning a dream boat is a privilege that encapsulates excitement, adventure, and prestige – a tangible reward for hard work and dedication. - read more
Australia's vast coastline and picturesque waterways make it a haven for boating enthusiasts. From the thrill of open waters to the serene escapes in hidden bays, owning a boat is a unique way to explore the natural beauty that Australia has to offer. The sense of freedom that comes with having your own vessel is unmatched, and it is a lifestyle many Australians aspire to experience. - read more
When it comes to purchasing a boat, financing plays a vital role for many individuals in Australia. However, applying for boat financing can be a complex process, and making mistakes along the way can lead to significant financial consequences and missed opportunities. - read more
Welcome to the world of boat ownership! Whether you're dreaming of sailing the serene waters of Port Phillip Bay or exploring the vast Australian coastline, owning a boat is a thrilling adventure. However, like any significant investment, it's crucial to understand the financial responsibilities involved. - read more
Australia's crystal-clear waters and expansive coastlines make it a haven for maritime enthusiasts. Boating is not just a leisure activity but a way of life for many Australians, with vessels ranging from modest dinghies to luxurious yachts gracing the shorelines. The boating lifestyle in Australia speaks to a culture of adventure, relaxation, and a love for the great outdoors. - read more
Start Here
Quotes are offered free & without obligation. We respect your privacy.
Knowledgebase
Loan Origination Fee: A fee charged by a lender for processing a new loan application, typically expressed as a percentage of the loan amount.
