In response to the country’s escalating inflation rates, ANZ revised its previous forecast, deeming a final cash rate of 4.1 percent insufficient to address the problem.
The bank now forecasts that the Reserve Bank of Australia’s (RBA) Terminal Cash Rate should be raised to 4.35 percent.
ANZ stated: “We no longer believe that 4.1 percent will be enough to bring inflation back to target within a reasonable time frame. We expect a move as early as August.”
While the inflation rate for this month shows a higher annual increase of 6.8 percent, surpassing the 6.3 percent increase reported in March 2023, it remains below the peak of 8.4 percent recorded in December 2022 was observed.
Michelle Marquardt, head of price statistics at the Australian Bureau of Statistics (ABS), attributed continued high inflation in April to rising fuel prices.
She highlighted the important role car fuel plays in driving up the annual movement, highlighting the impact of the April 2022 fuel tax cut in half, which was fully reversed in October 2022.
At a recent Senate estimates hearing, RBA Governor Philip Lowe was rigorously questioned and refrained from declaring victory over inflation, implying Australians should brace themselves for further cost-of-living challenges.
Recognizing that the battle against inflation is far from being won, Lowe stated: “I will not declare victory until it is actually won. Therefore, we will not make such statements.”
The RBA has consistently stressed that inflation should return to the 2 to 3 percent range, a milestone it expects to reach by mid-2025.
Lowe highlighted the ongoing problem of weak productivity growth in the economy, which poses challenges for the RBA in managing inflation.
The RBA will release its final statement on the spot rate next week, following its upcoming meeting in June.
One of Australia’s largest financial institutions has decided to reverse a recent course taken by the ‘big four’ banks.
Westpac announced Thursday that it has reduced its two-year, fixed-rate, principal-and-interest home loans.
However, it also increased rates on its one-year fixed home loans and investment property loans.
Westpac’s two-year fixed rate is now 0.40 percent lower to 5.79 percent pa, while the one-year rate is up 0.15 percent to 5.79 percent.
“Starting today, the new rates will apply to new fixed-rate home loans and existing floating-rate home loans for customers who want to pay off part or all of their loan,” the bank wrote in an email to mortgage brokers.
“Clients should consider their own financial situation and seek independent advice when considering the option to lock in their loan.”
The changes come ahead of Tuesday’s RBA board meeting and follow comments made by Lowe at a hearing on Senate estimates on Wednesday, in which he would not rule out further rate hikes.
“I know that the higher interest rates are very unpopular right now and hurt people. I know it’s very difficult, but you know, the board discussions are coming up with the alternative,” he said at the hearing.
“If we hadn’t raised interest rates…inflation will be high for longer.
“So what we’re doing now is hard, but it’s necessary to avoid more pain and even higher interest rates later on.”
He also suggested that Australians should have more people living in their homes in the future to tackle the ongoing rental crisis.
The RBA has chosen to raise interest rates at 11 of its past 12 meetings to contain rising inflation.