Increased Cash Rate Impacts, Mortgage Holders
The latest increase adds an extra $77 a month to a $500,000 mortgage, $116 to a $750,000 mortgage, and $154 to a $1 million mortgage. This makes life harder for many Australians already struggling with the cost of living. Treasurer Jim Chalmers stated, "This was expected, it was flagged, the markets anticipated it, but it will still sting."
RBA Governor Comments on Monetary Policy and Household Spending
RBA Governor Philip Lowe acknowledged that "the full effect of the cumulative increase in interest rates is yet to be felt in mortgage payments." There is uncertainty around the slowdown in household spending, with some households having substantial savings but others experiencing a painful squeeze on their budgets.
880,000 Australians to Move from Fixed to Variable Rates
About 880,000 Australians are expected to move from fixed to variable rates this year. The RBA has continued to raise the cash rate in the face of persistently high inflation, with global inflation remaining very high. The outlook for the global economy remains subdued, with below-average growth expected this year and next.
Inflation Peaked, Expected to Decline
The latest Australian Bureau of Statistics data revealed that the monthly Consumer Price Index was up 7.4% from 12 months to January. RBA Governor Philip Lowe stated that goods price inflation is expected to moderate over the coming months. The central forecast is for inflation to decline this year and next, to be around three percent in mid-2025.
Further Rate Rises Expected
Further rate rises are expected in the coming months to ensure that inflation returns to the RBA's target band of 2 to 3%. Medium-term inflation expectations remain well anchored, and this must remain the case.