Economists expect the Reserve Bank of Australia (RBA) to maintain its aggressive interest rate policy and make another big rate hike in October.
The RBA will opt for a rate hike of 0.25% to 0.5% at its next meeting on October 5, saying it will consider the global economic outlook and consumer spending habits when making its decision.
Citing the hawkish stance of central banks around the world, Royal Bank of Canada economist Surin Ong predicted an October rate hike of 0.5%.
“With global interest rate expectations reset, the Australian dollar further depreciated and domestic inflationary pressures mounting, the RBA continues to face pressure for significant interest rate hikes,” Ong said.
Nonetheless, high levels of household debt and variable-rate mortgages by homeowners prompted the RBA to move the “neutral rate”, a rate that neither stimulates nor constrains economic activity, to international interest rates. She pointed out that it is likely to keep it lower than .
Separately, ANZ Economist We expected the RBA to end the tightening cycle when the neutral rate hit 3.35%. However, they said the rate could be higher.
“The RBA appears poised to slow the pace of rate hikes, but global experience suggests that more work is needed,” said ANZ economists.
“We expect the cash rate to rise to 3.35% by the end of the year, but there are growing risks that the cash rate will need to be raised to keep inflation in check.”
OECD downgrades Australia’s economic outlook
in the meantime, report According to the Organization for Economic Co-operation and Development (OECD), Australia’s economy may outperform Europe and the United States, but the country is still affected by a bleak global outlook.
In its latest interim report, the OECD downgraded Australia’s economic situation, forecasting real GDP growth of 4.1% in 2022 and 2% in 2023. This represents a decline of 0.1% and 0.5% respectively compared to the June forecast.
At the same time, the agency expected Australia’s core inflation to reach 5.4% in 2022 and ease to 4.3% in 2023.
Treasury Secretary Jim Chalmers agreed with the OECD’s view on the outlook for the Australian economy.
“The OECD report shows that the global economy is in a perilous state: slowing global growth, high inflation, falling real wages and extreme uncertainty,” he said. rice field.
“These challenges are intensifying, not diminishing, and Australia cannot escape the prospect of this darker and more dangerous world.”
However, he said there was reason to be optimistic about the long-term future of the Australian economy, and said the October budget would focus on “responsible” cost of living cuts.