Reserve Bank raises interest rates to an 18-year high, the fifth hike this year
Full report: RBA hikes cash rate for fifth time this year in blow to mortgage holders
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RBA interest rates live updates: the Reserve Bank of Australia has raised the cash rate with governor Michele Bullock to speak this afternoon. Follow the latest news. Photograph: Jeremy Piper/ReutersView image in fullscreenRBA interest rates live updates: the Reserve Bank of Australia has raised the cash rate with governor Michele Bullock to speak this afternoon. Follow the latest news. Photograph: Jeremy Piper/ReutersFrom 7m agoThe Reserve Bank has hiked rates for the fifth time this year, from 4.6% to 4.85%, in a bid to regain control of surging inflation amid the ongoing global oil shock triggered by the war in the Middle East.
The RBA’s decision to hit mortgage holders again comes as no surprise after inflation jumped to 4.3% in the year to September, and following tough talk from senior central bank officials over recent days and weeks.
The RBA’s cash rate has now reached its highest level since 2008.
Back-to-back hikes will heap more pain on over 3.3m households with home loans, and turn the screws on a federal government under pressure for its economic management.
The latest increase will lift the monthly interest payment on a $700,000 home loan by $107, according to Canstar, bringing the total rise in repayments over this year’s five hikes to $532.
Jim Chalmers, the treasurer, said prior to the announcement that “people are under substantial pressure already”, adding that higher borrowing costs would “make things much harder”.
We’ll have news for you in about 15 minutes.
CBA forecasts home prices to fall by 14%
Australia’s biggest lender, Commonwealth Bank, now expects national dwelling prices to suffer a peak-to-trough fall of about 14% amid souring economic conditions.
The bank, which had previously forecast prices to fall by 9%, revised its forecasts today ahead of what is expected to be the fifth interest rate rise this year.
CBA senior economist Trent Saunders said the price downturn had accelerated to capture mid-sized state capitals Brisbane and Perth.
Saunders expects prices to stabilise late next year.
The revised outlook aligns with CBA’s updated economic forecasts, which warn that the prolonged conflict in the Middle East is helping trigger a “sharper, longer slowdown”.
While most economists had anticipated low double-digit falls in Australian property prices, several now expect peak-to-trough drops of about 15%.
View image in fullscreen Photograph: Lukas Coch/AAP‘Sharper, longer slowdown’ predicted for Australian economy as fifth interest rate hike looms
Australia’s economy is set for a “sharper, longer slowdown”, major bank economists say, as the Reserve Bank is forced to keep interest rates higher to rid the nation of persistent inflationary pressures.
The RBA is widely expected to hit mortgage holders with a fifth rate hike on Tuesday, in a move that will push the cash rate to its highest since 2008 amid rising worries the economy could even be tipped into recession.
Belinda Allen, the head of Australian economics at CBA, said the extended Middle East conflict, collapsing house prices and a more aggressive central bank would drive real GDP down to just 1% by the middle of next year, nearly half the previous estimate of 1.8%.
Growth through 2027 would be barely stronger at an estimated 1.1%, according to the updated projections.
For someone with an average-sized new mortgage of $731,000, paying a typical rate of 6.2%, a 0.25 percentage point rate increase would add about $119 to their $4,596 monthly repayments.
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NSW premier warns of risk of ‘stopping the economy dead’
The NSW premier, Chris Minns, rejected commentary from some economists that the RBA’s decision would be straightforward.
I know they’ve got a just difficult decision to make. I accept that, but we’ve got to be careful that in their efforts to slow down the economy, they don’t stop it dead.
This is an extra hit to a pay packet that many people haven’t budgeted for, are not ready for. It’s going to have a massive impact on our economy.
Minns said a rate hike would have a “disproportionate impact” on the state’s economy due to NSW’s high house prices.
View image in fullscreenChris Minns. Photograph: Dean Lewins/AAPAnthony Albanese defended his government’s record in the face of a likely rate hike.
The prime minister is in Saint John’s, Antigua and Barbuda, for the Commonwealth heads of government meeting at the request of King Charles.
He has faced some criticism for being out of the country during the decision.
We work each and every day on cost of living.
What I recognise as well is that by engaging in the world, we can deal with our national security interests, but also make our economy stronger. That’s why we need to engage in the world.
View image in fullscreenAnthony Albanese meets British PM Andy Burnham ahead of the Commonwealth heads of government meeting. Photograph: Kin Cheung/ReutersChalmers flags more ‘savings’ in next federal budget
Asked why Labor can’t guarantee it won’t find net savings in the mid-year budget update, Jim Chalmers told RN the government is undertaking that task this month ahead of December’s release.
We are currently working our way through the spending pressures, the economic forecasts, and the savings options to come up with the best, most responsible budget update that we can.
There have been savings in all eight of our budget updates so far. There’ll be savings in the ninth as well.
The powerful expenditure review committee met on Monday, and will convene again on Wednesday to discuss savings, Chalmers said.
View image in fullscreenJim Chalmers. Photograph: Lukas Coch/AAPThe treasurer, Jim Chalmers, told ABC’s RN Australians are bracing for a “difficult decision” ahead of an expected rate hike.
Another rise would likely increase the cash rate to 4.85%, taking it to the highest level in 18 years.
People are under substantial pressure already, and obviously, if rates go up today, that will make things much harder, especially when there are already a number of rate rises in the system and their full effect hasn’t been felt yet.
Regardless of the decision that the Reserve Bank takes independently this afternoon, we know that there is more work to do to make the budget as tight as it can be.
Welcome to Guardian Australia’s live coverage of the Reserve Bank’s Tuesday board meeting.
It is widely expected the central bank will hike interest rates by 0.25 percentage points today to 4.85% – the fifth rate hike this year, and the highest level in 18 years.
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