Finder’s RBA survey: 55% of experts predict a cash rate rise in May

The nation's experts are almost split on whether the RBA will lift the cash rate in May.

In this month's Finder RBA Cash Rate Survey™, 42 experts and economists weighed in on future cash rate moves and other issues relating to the state of the economy.

Almost 1 in 2 panellists (45%, 19/42) believe the RBA will hold the cash rate for the second month in a row at 3.6%, leaving a slim majority (55%, 23/42) forecasting an increase.

Exactly half of the experts (50%, 21/42) are confident the RBA will increase the cash rate by 25 basis points, taking it to 3.85% in May. A further 5% (2/42) think we may see a rise of 15 basis points.

Beyond May, 3 in 4 (76%, 32/42) believe the RBA will hold the cash rate in June.

Graham Cooke, head of consumer research at Finder, said it was another divided outcome from the panel.

"This month's result is the tightest we've seen since the RBA started hiking the cash rate, highlighting the difficulty of managing inflationary pressures without breaking too many household budgets.

"While it's anybody's guess, I think the RBA will likely hold again this month, as there are some indications that the first 10 rate rises are only starting to have an effect. The full impact of the new rates may not be felt until later this year," Cooke said.

Angela Jackson of Impact Economics and Policy said she was expecting a rate increase.

"The latest inflation figures will provide enough justification for the RBA board to move again on rates, with services inflation in particular likely to weigh heavily on their decision."

However, Shane Oliver from AMP said it was more likely to hold.

"Inflation has now peaked and is falling a bit faster than the RBA expected.

"Although it's a close call, this bolsters the case – along with increasing evidence of slowing growth and a cooling labour market – for the RBA to leave rates on hold in May ahead of an eventual cut in rates to support struggling economic growth from later this year and through 2024," Oliver said.

Renters struggle as the country is plunged into crisis

Almost all experts who weighed in* (86%, 25/29) believe Australia is in a rental crisis.

According to Finder's Consumer Sentiment Tracker, nearly 1 in 2 (45%) Australian renters said they struggled to pay their rent in April.

Cooke said renters were hurting just as much as mortgage holders.

"Rising rents have made it difficult for almost half of all renters to afford a place to live, while a third of mortgage holders are facing a similar predicament.

"Anyone who is looking for a place to rent right now will tell you – there are few properties, long queues and stacks of applications ahead of you," Cooke said.

Leanne Pilkington from Laing+Simmons said there was a critical undersupply of rental accommodation, meaning little to no choice for renters.

"For investors, rising mortgage repayments, diminished returns and anti-landlord regulations are discouraging investment in residential property. On both sides, there are major problems," Pilkington said.

James Morley from The University of Sydney noted that rental supply is constrained and not easy to adjust quickly.

"Demand is very high given returning migration, including students in higher education," Morley said.

Median asking rents to increase as much as 9%

Median asking rents increased on average by 10% year-on-year across Australian capital cities in January 2023, CoreLogic data shows.

The panel forecast that rents will increase on average by 7–9% by the end of the year in Sydney, Melbourne, Brisbane, Adelaide, Canberra and Perth.

More modest increases are expected in Darwin (5%) and Hobart (4%).

This would put median asking rents at the end of 2023 at $655 in Sydney, $490 in Melbourne and $542 in Brisbane.

Is now a good time to buy property?

Interestingly, almost two-thirds of experts (64%, 16/25) believe now is a good time to buy property.

The Australian general population sees it almost exactly the other way.

Only 28% of respondents in Finder's Consumer Sentiment Tracker – a nationally representative survey of 1,079 Australians – think now is a good time to buy.

Cooke said buying a home is one of the most significant financial decisions a person can make in their lifetime.

"Whilst experts may think now is the time to buy, the astronomical cost of borrowing and the potential for further price falls are leaving the public unconvinced.

"In late 2022, several major banks predicted national property prices to fall by as much as 15–20% from their peak.

"The actual decline was 8.5% – so the market has proven more robust than predicted.

"If the declines continue to soften, we could see a recovery of sales volumes following the first cash rate cuts in early 2023."

Do you believe now is a good time to buy property?

*Experts are not required to answer every question in the survey

Here's what our experts had to say:

James Morley, The University of Sydney (Increase): "I think the RBA will treat April as a "pause" and note that rates could go higher as new data comes in. Inflation has peaked, confirming the reason for a pause in April. But it is still high at 7% and some of the underlying reasons (energy prices, rents) are expected to persist. Higher inflation means less of an increase in real rates from past actions than anticipated. So a further 0.25 ppt increase could be justified on that basis."

Jonathan Chancellor, The Daily Telegraph (Hold): "The RBA will hold off its next rate increase, but more are coming."

Tomasz Wozniak, University of Melbourne (Increase): "The new reading of the CPI inflation reaching 7% in the first quarter of 2023 aligns the quarterly forecasts with the monthly indicating the cash rate at 3.77% within the next 3–5 months. The prediction bands around this value reach from 3.4–4.1 %. My interpretation is a likely raise by 15 pp this or next month. Beyond this horizon, the forecasts diverge with the bond yield curve modelling indicating further increases and the system focusing on inflation, labour market and expectations showing cuts. The arrival of new macro data occurs essential in such dynamically changing circumstances."

Andrew Wilson, My Housing Market (Increase): "Clearly slowing economy continues unimpeded by rate rises with services inflation now on the rise – missed opportunity over April for Bank to keep pressure on inflation."

Nicholas Gruen, Lateral Economics (Increase): "It's line ball this week, but the Bank may want to raise rates before the budget so as not to be seen to raise them after the budget."

Harry Murphy Cruise, Moody's Analytics (Hold): "Price pressures are undoubtedly easing. And with the lagged impact of monetary policy, another pause to assess how the backlog of rate hikes is working is warranted. We expect the board to hold rates steady at its next meeting, keeping a rate hike in the back pocket for June if needed. In the meantime, board members will want to see heat come out of the red-hot labour market and retail sales moderate. If that doesn't happen, you can bet your bottom dollar the board will reach into that back pocket. We put the odds of that happening at 65%."

Sean Langcake, BIS Oxford Economics (Increase): "Inflation has peaked, with cooling global inflation now starting to weigh heavily on goods and tradables inflation. However, core inflation pressures remain strong, owing to very tight labour and rental markets. These sources of inflation will be persistent. The question now becomes how quickly the RBA wants inflation to return to target. They have been surprisingly dovish in some communications, but we still expect further tightening with an eye toward maintaining credibility and anchoring expectations."

Angela Jackson, Impact Economics and Policy (Increase): "The latest inflation figures will provide enough justification for the RBA board to move again on rates, with services inflation in particular likely to weigh heavily on their decision."

Malcolm Wood, Ord Minnett (Increase): "Jobs growth and services CPI too high."

Shane Oliver, AMP (Hold): "Inflation has now peaked and is falling a bit faster than the RBA expected. Although it's a close call this bolsters the case along with increasing evidence of slowing growth and a cooling labour market for the RBA to leave rates on hold in May ahead of an eventual cut in rates to support struggling economic growth from later this year and through 2024."

Anthony Waldron, Mortgage Choice (Increase): "The latest economic data points to a cash rate increase in May. The labour market data for March was strong, and the latest Consumer Price Index (CPI) data from the ABS revealed inflation remained high in the March quarter, leaving the RBA with little choice but to raise the cash rate."

A/Prof Mark Melatos, School of Economics, University of Sydney (Hold): "Inflation has moderated slightly recently. This is likely to encourage the RBA to pause rate hikes to get more clarity on how previous hikes have impacted the economy."

Mark Crosby, Monash University (Increase): "While inflation is coming down slowly, the real interest rate is still low, warranting at least one more rate rise, though more likely June or July than in this meeting."

Matthew Greenwood, University of Melbourne (Increase): "Inflation is still significantly above target and the RBA cannot risk it becoming entrenched."

Nalini Prasad, UNSW Sydney (Hold): "The RBA recently paused their sequence of rate rises to assess how previous rate rises have impacted the economy. They could continue to do that this month. Despite some recent moderation in price growth, inflationary pressures in the economy are still strong. Of particular concern is that market service inflation and rental inflation is still relatively high. The former which capture labour costs suggest that interest rate rises have so far lacked a large bite in the services sector."

Saul Eslake, Corinna Economic Advisory Pty Ltd (Hold): "Today's March quarter CPI and monthly March CPI indicator provide further evidence that inflation, though still "unacceptably high", is at least clearly now heading in the right direction (i.e. down). And with a good deal of the effects of the monetary policy tightening still to be felt, the RBA can again leave its policy settings unchanged at its May Board meeting."

Leanne Pilkington, Laing+Simmons (Increase): "It appears at least one more rise is on the agenda so despite the additional pain it will cause, the RBA will perhaps take the view of the sooner, the better."

Evgenia Dechter, UNSW Sydney (Hold): "The RBA might hold the rates due to the slowdown in inflation, at least until more data on labour markets and wages are available."

Stella Huangfu, University of Sydney (Hold): "It is obvious from the CPI data released today that the inflation has peaked. The RBA should keep the cash rate on hold for at least one more month to see the full effect of the 3.5% increase in the cash rate since May 2022."

Tim Reardon, HIA (Increase): "The RBA has only paused."

Rich Harvey, Propertybuyer (Increase): "Inflation is still too stubbornly high at 7%. The RBA needs to see a material declining trend before they fully pause."

Mathew Tiller, LJ Hooker Group (Increase): "Despite the most recent fall in the CPI, inflation remains too high and employment markets are tight which should prompt the RBA to increase the cash rate."

Nicholas Frappell, ABC Refinery (Hold): "March CPI coming in weak gives the RBA more time to ponder the rate pathway."

David Robertson, Bendigo Bank (Hold): "The RBA will maintain a tightening bias throughout 2023, and another hike to 3.85% can't be ruled out this year, but the welcome lower read on core inflation for Q1 provides scope for a further pause in rate hikes for now."

Stephen Miller, GSFM (Hold): "I think the inflation environment will mean another increase after the release of the June quarter CPI on July 26th."

Tina Teng, CMC Markets (Increase): "Inflation stays at a high level, and labour markets stay tight."

Brodie Haupt, WLTH (Increase): "Although inflation has slightly fallen in March, price pressures remain elevated in some key CPI components. The labour market also remains very tight."

Garry Barrett, University of Sydney (Increase): "Persistently high inflation."

Cameron Kusher, REA Group (Increase): "It's a very unconfident 25bp hike pick. Inflation was about where expected but the outcome of the RBA Review was pretty clear that they expect the RBA to be much more focused on keeping inflation at the middle-point of the band. Of course the RBA Review is not implemented but the messaging was clear and I think it offers the RBA cover to increase rates again."

Alan Oster, Nab (Hold): "Inflation better than expected and economy softening. Pays to wait further and by then the economy may well be flat lining."

Peter Munckton, Bank of Queensland (Hold): "Inflation is still too high."

Michael Yardney, Metropole Property Strategists (Increase): "The latest inflation figures leave the RBA with a dilemma. We are past the peak of inflation, but the latest figures are likely to be too high for the RBA's liking. However they would be encouraged by the "trimmed mean measure" which removes the most volatile price moves – which fell from 6.9% in December to 6.6% in the latest figures."

Jeffrey Sheen, Macquarie University (Hold): "The RBA paused its rate hikes in April because it wanted to wait and see whether inflation was responding to previous tightening and because of the evident risks of financial instability and a credit crunch. The March quarter inflation has revealed that the peak has probably been reached. However services inflation is still rising, but that should abate this year as catch-up from the lost COVID lockdown years is completed. The RBA should continue to wait and see, and to avoid a credit crunch that would risk a recession. Though much uncertainty remains, there is a fair chance of normalisation through 2023 so that interest rates can begin to moderate."

Cameron Murray, University of Sydney (Hold): "Despite the pause on rates last month, the economy seems to be getting a second wind. If the expected reduction of inflation arrives too slowly, the RBA may choose to raise rates again. This seems more likely at the moment than a reduction in rates during 2023. So does a pause count as a peak?"

Tim Nelson, Griffith University (Hold): "RBA has been targeting inflation through a rapid series of rate rises. With global outlooks becoming less optimistic, rates may have peaked. Much depends on Australian governments and their approach to fiscal policy."

Dale Gillham, Wealth Within (Increase): "CPI rose in the December quarter and the March quarter figures are due this coming week and I suspect whilst it may report a decrease in CPI, it is unlikely to be enough. The RBA generally over shoots interest rate rises and I think we will see one more in the next month."

Noel Whittaker, QUT (Increase): "They have made it very clear that rate rises are not yet finished – and if you can believe the media it was line ball at the last meeting."

Jason Azzopardi, Resimac (Hold): "Allow recent increases to flow through for a period of time before further data suggests an increase is necessary."

Jakob Madsen, University of Western Australia (Hold): "Inflation is still high and the economy has not yet shown signs of weakness."

Geoffrey Harold Kingston, Macquarie Business School (Increase): "Last month I quoted a David Bowie song: "It's too late to be late again." The Bank proved me wrong then, but not this month, I think."

Stephen Halmarick, CBA (Increase): "One last rate hike in May, before easing gets underway by year-end."

Craig Emerson, Emerson Economics (Hold): "The RBA has done more than enough tightening. The economy is slowing and there is no evidence of a wage-price spiral. Further tightening would risk a recession."