Hike or hold? Experts split on RBA’s next cash rate move

Economists and market commentators are divided over whether the Reserve Bank of Australia (RBA) will deliver a second consecutive increase in the cash rate at its next decision, according to a new poll by Finder.

Finder’s monthly RBA Cash Rate Survey canvassed 37 panellists on the outlook for policy settings and broader economic conditions. A majority, 62%, expects the RBA Board to leave the cash rate unchanged tomorrow, while 38% is forecasting a rise.

Most respondents do not see relief in the near term. In the same survey, 84% of experts said they did not expect any rate cut over the coming 12 months.

“We’re seeing a real tug-of-war in the forecasts,” said Graham Cooke (pictured right), head of consumer research at Finder. “While all four of the big banks are predicting a hike, some experts in our survey aren’t convinced the RBA will move just yet.

“Between the volatility in the Middle East pushing up fuel prices and the RBA’s need to rein in inflation, it’s a high-stakes guessing game for everyone.

“There’s no meeting in April so the board may be moved to act now. A rate hike would put immense pressure on household budgets that are already stretched thin,” Cooke said.

Some panellists, such as AMP’s chief economist Shane Oliver, argued the risk of further inflation warrants immediate action.

“We expect that the RBA will raise rates again at its March meeting reflecting concerns about a further boost to inflation and inflation expectations as a result of higher energy prices flowing from the US/Israel war with Iran at a time when inflation is already above target,” Oliver said.

Meanwhile, Leanne Pilkington, chief executive of real estate franchise network Laing+Simmons, anticipated no change at the upcoming meeting.

“Uncertainty rules at the moment,” she said. “The war in the Middle East is impacting oil prices in the immediate term but has the potential to cause economic damage too. We think the sensible path is to hold rates steady until a clearer picture emerges.” 

Finder estimated that a 25 basis point increase in March would add to mortgage costs for many borrowers. For an average home loan of $736,259, it calculated an additional $2,805 a year compared with repayments before the RBA began lifting the cash rate earlier this year. On a $1 million mortgage, it put the annual increase at $3,810 over the same comparison.

“If you don’t know what interest rate you’re paying on your mortgage, or haven’t looked to see if you can get a better deal, you’re probably paying too much,” Cooke said. “The difference between the average market rate and the best available is significant.

“Negotiating even a small discount with your lender, or refinancing to a better deal, could effectively cancel out the impact of next week’s predicted rise.” 

The poll also asked panellists about the RBA’s inflation progress. Among those who responded to that question, 72% said they did not believe inflation was under control.

“It's clear the RBA is worried about inflation, but they don't seem to have a great handle on reading the economic tea leaves (after all, that's their job) in a timely fashion,” said Scott Kuru, chief executive of property forecaster Freedom Property Investors.

“They waited far too long to start raising rates in 2022, and on reflection, their decision to lower the cash rate for a third time in August last year was probably premature.”

Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.