All four major banks expect a September increase as the Reserve Bank governor warns about persistent price pressures. Fixed mortgage rates are already climbing.
By the online editorial team
Australian borrowers face the prospect of another interest rate rise after Reserve Bank governor Michele Bullock warned that pressure in the labour market and the global energy shock could keep inflation elevated.
Speaking at a Committee for Economic Development of Australia event in Sydney, Bullock gave little encouragement to those hoping for a pause at the RBA’s September 28–29 Monetary Policy Board meeting. All four major banks now expect an increase, although the board has yet to announce its decision.
Bullock said Australia’s labour market was probably still too tight, contributing to upward pressure on wages, business costs and prices. She suggested an unemployment rate between 4.5 and 5 per cent would probably ease those pressures sufficiently.
The forthcoming August employment figures will provide another important reading of the economy before the board meets.
The governor also stressed the need to prevent higher global energy costs from feeding into repeated domestic price increases. Monetary policy must contain these indirect effects and keep households and businesses confident that inflation will come under control, she said. Reserve Bank of Australia
Bank forecasts shifted after Bullock’s recent appearance before a federal parliamentary committee. NAB had already anticipated a September increase, while Commonwealth Bank, Westpac and ANZ subsequently revised their expectations to include a rise at the coming meeting.
CBA and Westpac see a risk of another increase in November. ANZ forecasts rises at both meetings, which would take the cash rate to 4.85 per cent, its highest level since late 2008.
The prospect of further tightening is already affecting mortgage pricing. Commonwealth Bank has increased its two-year fixed home loan rate by 0.48 percentage points to 6.82 per cent, with other fixed rates rising by between 0.15 and 0.30 percentage points.
Comparison service Canstar said the changes followed increases of up to 0.20 percentage points by the other three major banks in the preceding week.
The lowest one- and two-year fixed rates offered by the big four were 6.49 per cent, compared with their lowest variable rates of between 5.99 and 6.25 per cent. The gap reflects expectations of higher borrowing costs, although individual offers depend on the loan and borrower’s circumstances.
Bullock’s discussion also addressed artificial intelligence, highlighting a tension between its potential to improve productivity and the immediate demands created by investment in the technology.
Over time, she said, better use of AI could help businesses produce more efficiently and reduce inflationary pressure. For now, however, spending on data centres and supporting infrastructure is adding demand before substantial improvements in the economy’s productive capacity have become evident.
That timing presents a challenge for Australia while demand is already exceeding supply, she said.
The governor also acknowledged concerns that enthusiasm for AI
