Economists point to stubborn inflation, tight jobs market and Middle East risks
ANZ and the Commonwealth Bank have updated their expectations for the Reserve Bank of Australia’s next moves, joining NAB and Westpac in forecasting consecutive cash rate increases across the next two monetary policy meetings.
Both banks now anticipate a 0.25 percentage point rise on Tuesday, with a further increase in May that would take the cash rate to 4.35%. The RBA is not scheduled to meet in April.
“With inflation above target and the labour market tight, the inflation risks are likely to be more central for the Board than risks around activity,” stated ANZ’s economic team. “The increased inflation risks will exacerbate those concerns, creating more urgency to move quickly to contain inflation expectations.”
“The debate at the March meeting will be a close one,” said Belinda Allen, head of Australian economics at Commonwealth Bank. “But with inflation still above target and the economy running above trend, we expect the Board will choose to lift rates again and follow up with another move in May.”
The change in forecasts comes as global conditions have become more uncertain. Escalating conflict in the Middle East has raised the prospect of higher energy prices, which could add to inflation pressures, while also posing downside risks to global growth.
For borrowers, the potential impact is material. On a $600,000 mortgage with 25 years remaining at the start of the increases, a March rise would add about $91 to monthly repayments. If there were two increases for the year in February and March, the combined lift would be about $181; three increases would take the total to around $272.
| Impact of three 0.25 rate hikes on monthly repayments | ||||
|---|---|---|---|---|
| Debt owning | February | March | May | Total |
| $600,000 | +$90 | +$91 | +$91 | +$272 |
| $800,000 | +$120 | +$121 | +$122 | +$363 |
| $1 million | +$150 | +$151 | +$152 | +$453 |
| Source: Canstar.com.au. Based on an owner-occupier paying principal and interest with 25 years remaining in February 2026 on the RBA average variable rate. Calculations assume banks pass on the hikes the month after. Changes are to minimum repayments. | ||||
Canstar data suggests lenders are already positioning for a cash rate move. The comparison site reported that, in the past two weeks, 20 lenders lifted a combined 369 fixed rates ahead of Tuesday’s RBA board meeting.
“ANZ and CBA have joined NAB and Westpac in tipping another rate hike on Tuesday, following comments from the RBA’s deputy governor, Andrew Hauser, which reiterated the bank’s determination to rein in ‘toxic’ inflation,” said Sally Tindall (pictured right), data insights director at Canstar.com.au. “He did, however, acknowledge, more than once, that it would be a line-ball call, saying the Board has its work cut out for it next week.
“From a rate tracking perspective, the banks appear to be factoring in a hike. Analysis of the Canstar database shows 20 lenders have increased close to 400 fixed rates in the past fortnight, while 41 banks have hiked 184 term deposit rates. That’s two very loud canaries in the coal mine right there.”
Tindall advised those that have a mortgage to start preparing for higher rates. “There are still over 40 lenders offering at least one variable rate under 5.50%,” she said. “Switch, haggle, do whatever it takes to get yourself on a lower starting rate in case the one rise we saw last month turns into a rate hike frenzy.”
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