- The Reserve Bank of Australia is has announced a cash rate rise to 0.85 per cent
- It comes after the RBA’s decision in May to lift the rate to 0.35 per cent from a record low of 0.1 per cent
Westpac was the first of the banks to pass on the hike, lifting its variable interest rates by the full 0.5 percentage points.
‘Inflation will get harder before it gets easier’
Mr Chalmers also said the government would “do what it can” to alleviate price pressures on Australians.
“We want to work with Australians, we want to work with all parts of our economy to do what we can to get on top of this inflation challenge and the interest rate rises that accompany it.”
What has the Opposition said?
“The one thing a government can do to reduce pressure on inflation and interest rates is to manage its finances well,” he said.
Opposition treasury spokesperson Angus Taylor described it as a “really tough day” for homeowners. Source: AAP
“This is why we say a number of the initiatives that Labor committed to in the election campaign – $45 billion of off-budget spending, $18 billion of on-budget spending – is adding pressure. It adds pressure to inflation and interest rates and that’s why that spending needs to be looked at very hard.”
How do homeowners feel?
Shortly afterwards, when his bank had preemptively wanted to increase his rates, he was able to liaise with his mortgage broker to secure a fixed rate of 3.49 per cent for the next three years.
“Who knows, in the next time, when that term expires, what the interest rate will be and what could happen there, especially with wages not really increasing too much.”
What you’ll pay if banks follow the RBA
If your mortgage is (size, new monthly repayments, increase):
- $300,000 – $1660.33 – $91.77
- $350,000 – $1937.05 – $107.06
- $400,000 – $2213.77 – $122.36
- $450,000 – $2490.49 – $137.65
- $500,000 – $2767.22 – $152.95
- $550,000 – $3043.94 – $168.24
- $600,000 – $3320.66 – $183.54
- $650,000 – $3597.38 – $198.83
- $700,000 – $3874.10 – $214.13
This assumes a 30-year standard variable rate loan at an average new interest rate of 5.27 per cent.
What has the RBA said?
“But domestic factors are playing a role too, with capacity constraints in some sectors and the tight labour market contributing to the upward pressure on prices. The floods earlier this year have also affected some prices.”
The cash rate rise in May 2022 was the first hike in over a decade. Source: SBS News
Dr Lowe said inflation is expected to increase further before declining towards the 2 – 3 per cent range next year.
Consumers ‘increasingly pessimistic’
The weekly ANZ-Roy Morgan consumer confidence index — a pointer to future household spending — was also released on Tuesday, which is now at its lowest level since mid-August 2020, down 4.1 per cent for the week.
Persistent talk of a “gas crisis” is also likely to undermine sentiment.