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The Reserve Bank of Australia is widely expected to lift the cash rate to 4.6 per cent at 2:30pm AEST, its fourth hike this year and a 15-year high, with Governor Michele Bullock due to speak at 3:30pm.
The Reserve Bank of Australia is expected to raise the cash rate to 4.6 per cent at 2:30pm AEST today, its fourth increase this year and a 15-year high.
The widely expected move will add to repayment costs for millions of mortgage holders across the country. RBA Governor Michele Bullock will hold a press conference at 3:30pm after the monetary policy board delivers its decision. Expectations are that the cash rate will rise to 4.6 per cent, with markets having predicted before the decision a further hike by February and more than a 50% chance of another by mid-2027.
Markets Await Rate Decision
The ASX 200 opened higher and was up 0.1 per cent in morning trading ahead of the decision. The index has lost 0.8 per cent over the last five days but is virtually unchanged year to date. US bonds surged as Wall Street closed lower, while oil is trading above US$105 a barrel.
Data to be released on Wednesday is expected to show underlying inflation rising at an annual pace of 3.6% for the third month running in August, well ahead of the RBA's target range of 2% to 3%. Bullock has warned workers and businesses could lift their prices and wage demands as they start to expect persistent high inflation.
CreditorWatch chief economist Ivan Colhoun said the RBA is expected to raise rates to fight inflation but warned this likely will not be the end of the pain for borrowers. He said the main uncertainty is about the timing of the next decision. That will come down to whether the RBA Board is now more serious about fighting inflation, as seems to have been the message recently of senior RBA officials, or whether it will continue with its gradual approach.
RBA Signals and Economic Impacts
The statement at 2.30pm and the subsequent press conference will give us some clues, he said, adding he expects the statement to continue to suggest inflation risks remain to the upside. Independent economist Chris Richardson told The Business the Reserve Bank is going to have to wield the only tool it has to clamp down on inflation. But it has other impacts too, he said, including on the exchange rate.
We get to pick our poison but we cannot avoid the fact that it is poison to bring inflation down, he said. There has to be pain for someone. Treasurer Jim Chalmers blames high inflation, made worse by war in the Middle East, for the economic conditions leading to the likely hike. He told ABC's 7.30 program last night that the Australian economy was performing remarkably well considering extraordinary global instability.
We have got a big inflation challenge in our economy. It is made much worse by decisions taken on the other side of the world, Chalmers said. From an economic point of view, this war in Iran has been an absolute disaster for Australian families because they have been asked to pay a hefty price for it. Speaking to Channel Seven on Tuesday morning, Chalmers said the US war on Iran, not government spending, was to blame for inflation.
Inflation Blame and Policy Debate
When you see what's happening with global oil prices, when you see what's happening with the re-escalation of the war in the Middle East, obviously, factually, that is one of the big drivers of that inflation, he said. Chalmers also appeared to reject a suggestion by Bullock that unemployment would need to reach 5 per cent for inflation to come down.
I think we have seen in the past that we can get inflation down while maintaining very low unemployment, he said. Independent senator David Pocock said government spending was a contributing factor to high inflation and warned energy companies were taking advantage of Australian consumers. Clearly, government spending is part of this. You cannot blame it all on the war in the Middle East, he told Nine's Dominic Lorrimer.
Pocock said he gets frustrated that not enough is being said about the profits of big gas multinationals and Ampol's almost 500 per cent increase in profits at a time when Australians are paying through the nose for petrol and diesel. He reiterated calls for a windfall profits tax to recoup some profits from gas and energy multinationals such as Ampol and Woodside during major geopolitical or supply chain shocks.
Borrowers Urged to Seek Lender Help
The Finance Brokers Association of Australia urged borrowers to check with lenders about options to keep afloat. CEO Leo Gagic said that while the association hopes the RBA holds rates, a rise is widely expected. If it does increase the cash rate, it will add to the pressure many borrowers are already facing and make it even more important for them to understand their options, he said.
Borrowers should check what their lender does with the increase, when their repayments will change, and whether their home loan is still competitive, he said. If you are worried about meeting a repayment, speak to your lender or mortgage broker early. A conversation now can help you understand your options before the pressure becomes more difficult to manage. Capital Economics senior APAC economist Abhijit Surya noted household spending data reinforced the view that further tightening thereafter is unlikely.
The ABS Household Spending Indicator was flat in August, though the headline figure was propped up by a 2.3 per cent monthly rise in transport spending, partly reflecting fully restored fuel excise duties. Mr Surya said the data probably would not keep the RBA from hiking rates today.
However, restrictive policy settings will weigh on consumer spending more significantly in coming months and help ease inflationary pressures, he said. Accordingly, we are sticking to our view that today's hike will be the last of the tightening cycle, even though markets are bracing for additional rate hikes in the months ahead. Household spending was unchanged in August, according to new Australian Bureau of Statistics data, but excluding fuel spending, total household spending would have fallen by 0.3 per cent.
Spending rose in July by 1.1 per cent and in June by 0.9 per cent. Tom Lay said recreation and culture spending saw the largest fall, down 1.4 per cent, after months of higher spending associated with major sporting events. Clothing and footwear, recreational goods, food, health and furniture also declined.
Armaguard Cash Distribution Undertaking
Separately, the ACCC is seeking the views of large and small retailers, banks, and other interested parties on a proposed undertaking from Linfox Armaguard relating to the distribution of cash. Cash fell from almost 70 per cent of transactions in 2007 to 13 per cent in 2022, and the federal government has mandated its acceptance for essential purchases such as fuel and groceries.
To ensure its survival, Armaguard merged with rival Prosegur in 2023, and the company and the Australian Banking Association struck a deal last October to recognise the movement of banknotes around the economy as an essential service.
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brisbanetimes:Australia news LIVE: RBA expected to announce fourth rate rise this year; Greens leader Larissa Waters steps down due to illness; Trump denies asking Xi about potential US arms sales 
abcnews:Live: Interest rates expected to reach 15-year high as RBA meets 
GuardianAus:RBA interest rates: Reserve Bank hikes cash rate to 4.6%, the highest level since 2011This story was compiled and edited by the HeadTopics newsroom and HT AI from the reports above.
Jim Chalmers Inflation Larissa Waters Resignation Trump China Arms Sales David Pocock Windfall Tax RBA Interest Rate Decision Cash Rate 4.6 Per Cent Larissa Waters Resigns Linfox Armaguard ACCC Australian Cash Rate Inflation Household Spending Linfox Armaguard RBA Cash Rate Michele Bullock Australian Inflation Jim Chalmers Mortgage Holders
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