Finder’s RBA survey: 95% of experts predict another cash rate hike

Aussie homeowners should brace for a ninth straight blow, according to a new Finder poll.

In this month's Finder RBA Cash Rate Survey™, 44 experts and economists weighed in on future cash rate moves and other issues relating to the state of the economy.

Almost all panellists (95%, 42/44) believe the cash rate will increase on Tuesday, with the majority (91%, 40/44) forecasting another increase of 25 basis points – bringing it to 3.35% in February.

The panel forecast that the cash rate will eventually peak on average at 3.75%; however, 3 in 4 (75%, 33/44) say the RBA will hold the cash rate in March.

Graham Cooke, head of consumer research at Finder, said a growing number of households were being plunged into mortgage stress.

"Our consumer research shows that 1 in 3 Australians now struggle to pay their home loan – double what it was in October 2021.

"With the current series of hikes having already added almost $11k to the annual cost of the average Aussie mortgage ($601,793), a ninth consecutive rate hike might prove to be the last straw for many."

Cameron Kusher of REA Group cited persistent inflation as a key reason for the anticipated rate rise.

"Inflation just reached its highest year-on-year level since the early 90s with underlying inflation above forecasts. I can't see the RBA not hiking in this situation," Kusher said.

Evgenia Dechter of UNSW agreed.

"The economy shows signs of a slowdown; however, the RBA might go with an additional rate increase to signal its determination to do 'whatever it takes' to fight inflation," Dechter said.

Average Aussie mortgage repayments

Little relief in sight for renters

The asking price of rentals increased 10% nationally in October 2022 year-on-year, according to CoreLogic data.

More than 1 in 2 experts who weighed in* (58%, 18/31) agreed further increases to the cash rate will put upward pressure on rents in 2023.

Mala Raghavan from the University of Tasmania said landlords are bound to pass on the rising mortgage costs to tenants.

"Since there is a limited supply of rental properties in the market (with a low vacancy rate), even the unaffected landlords could conveniently increase the rental in the market," Raghavan said.

Leanne Pilkington from Laing+Simmons agreed.

"There is a clear shortage of rental accommodation and as rates rise, this undersupply combines with higher repayment costs for investors to impact rents," Pilkington said.

This comes as Finder research reveals almost a third of Australian tenants (27%) have gone to extreme lengths to secure their most recent rental property – equivalent to over 780,000 households.

The data shows 9% have offered to pay more than the asking price, while 8% paid several months upfront in order to guarantee their rental.

A small number even told a fib to secure their home – 6% lied about their income, 5% lied about not having pets and 3% fibbed about their savings.

Cooke said a red-hot market is to blame for renters going beyond their means to outdo competition.

"It's a cut-throat world out there for potential renters – with huge crowds turning up for the best properties.

"All you can do is make your application as appealing as possible, without being dishonest.

"Apply for several properties and expand your potential rental zone if necessary. Above all, make sure you don't over-stretch yourself, as rents could rise again after the first year," Cooke said.

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

Here's what our experts had to say:

Stephen Koukoulas, Market Economics (Hold): "Slow growth, an uptick in the unemployment rate and a sharp fall in inflation will allow a rate cut by year end."

Cameron Murray, University of Sydney (Hold): "Hard to see continued inflation pressure, and I expect that the US, Canada, NZ etc will also pause their rate rises now."

Andrew Wilson, My Housing Market (Increase): "Inflation concerns."

Tomasz Wozniak, University of Melbourne (Increase): "The forecasts from yield curve models using weekly and monthly rates as well as those from the models including quarterly inflation, inflation expectations and labour market conditions draw a similar picture: the interest rates will keep increasing until mid-2023 reaching the level of 3.5%, with a likely range from 3.1% to 3.9%. The models of quarterly data indicate sharper increase with a higher uncertainty. The year is likely to close with the cash rate at the level of 3.7%. The forecasts are available at https://donotdespair.github.io/cash-rate-survey-forecasts/"

Evgenia Dechter, UNSW (Increase): "The economy shows signs of a slowdown; however, the RBA might go with an additional rate increase to signal its determination to do 'whatever it takes' to fight inflation."

Mark Crosby, Monash University (Increase): "Latest inflation numbers warrant further rate rises at least until mid year."

Mala Raghavan, University of Tasmania (Increase): "The gradual upward movement of the cash rate is an anticipated monetary policy measure to dampen the rising inflation rate. These tightening measures are expected to continue to peak at around 3.75 in the middle of the year, after which the RBA is expected to ease the cash rate as the inflation rate falls. Though pressures from supply chain disruptions, commodity prices, upstream costs and consumer demand are easing, the pace at which inflation will fall will be slow due to the uncertain global economic and political environment."

Mark Brimble, Griffith Uni (Increase): "A further increase to dampen down lingering pressure and then likely to hold as the broader tightening over past months flow through the economy. This could change if US/Europe has a further breakout of headline inflation."

Tim Reardon, Housing Industry Association (Increase): "Because they inferred this in their recent statement. The RBA appears set to continue the roller coaster ride for the Australian economy, rather than waiting for their 2022 increases to take effect."

Anthony Waldron, Mortgage Choice (Increase): "We've recently seen the largest annual increase in inflation since 1990, so the Reserve Bank Board will be feeling pressure to kick off 2023 with another rise to the cash rate."

Christine Williams, Smarter Property Investing P/L (Increase): "Spending is easing, borrowing has reduced and the market is settling."

Brian Parker, Australian Retirement Trust (Increase): "Labour market is softening but not by enough to ease RBA's inflation concerns and the recent CPI data probably cemented the case for another move."

Garry Barrett, University of Sydney (Increase): "Inflation remains persistently high."

Stephen Miller, GSFM (Increase): "Because inflation has a lot more momentum than is appreciated by the market and perhaps the RBA."

Nicholas Gruen, Lateral Economics (Increase): "Because inflation has risen."

Harry Murphy Cruise, Moody's Analytics (Increase): "With inflation still much higher than desirable, a further rate hike in February is all but certain. We anticipate interest rates to stay at a peak of 3.35% through 2023, helping to gradually unwind current price pressures. As inflation returns to the RBA's target band of 2% to 3% in 2024, businesses and households will be in for a well-deserved reprieve as the board cuts rates from their contractionary levels."

A/Prof Mark Melatos, School of Economics, University of Sydney (Increase): "Inflation, especially the trimmed mean of the CPI, remains significantly above the RBA's target band. The RBA is still in catch-up mode with respect to matching their cash rate settings to the inflation reality. The RBA's hand is likely to be forced by continued monetary policy tightening by other central banks. This means the cash rate will likely need to be raised steadily throughout much of 2023. The RBA is only likely to pause raising the cash rate once the trimmed mean starts to fall."

Brodie Haupt, WLTH (Increase): "The current annual inflation rate in Australia is 7.8%, according to ABS data released on 25 January. It is almost certain the Reserve Bank will continue to increase the cash rate until the inflation begins to abate."

Leanne Pilkington, Laing+Simmons (Increase): "The Reserve Bank may feel it necessary to act in response to ongoing inflationary pressures; however, the rate rises of 2022 are having a major impact and households need a reprieve."

Jakob B Madsen, University of Western Australia (Increase): "The US FED funds rate is significantly higher than the RBA cash rate and inflation is still running high."

Matthew Greenwood-Nimmo, University of Melbourne (Increase): "Inflation is considerably higher than the RBA can tolerate."

Peter Munckton, Bank of Queensland (Increase): "Inflation is too high and interest rates need to be higher."

Cameron Kusher, REA Group (Increase): "Inflation just reached its highest yoy level since the early 90s with underlying inflation above forecasts. Can't see the RBA not hiking in this situation."

Nicholas Frappell, ABC Refinery (Increase): "CPI data and strong labour data suggest rates will continue on an upward path towards the expected Terminal rate."

James Morley, The University of Sydney (Increase): "The Q4 inflation was high enough that the RBA will want to be seen to respond. Also, international conditions are still not in recession, so the RBA will believe any downward external drag on economic conditions will come later than they might have previously worried about. I believe the RBA will signal more in advance before they pause. There has been no such signal yet. They could raise in the next two meetings, or three if they want to see the Q1 inflation number (being substantially lower) before pausing their increases. I think increases will be by 25bp increments, consistent with the RBA's recent 'gradualism' approach."

Alan Oster, Nab (Increase): "Need to address still too high inflation but not overdo the impact on the economy."

Jason Azzopardi, Resimac (Increase): "Inflationary concerns remain – no sign of change in spending habits exist."

Angela Jackson, Impact Economics and Policy (Increase): "The focus through 2023 will remain on containing inflation."

Noel Whittaker, QUT (Increase): "I believe the reserve bank will raise rates by 25 basis points on Tuesday week in light of the unexpected high inflation figures that came out on 25 January. However, the bank is aware of the lead effect and I still think they will be somewhat hesitant to raise rates too quickly in the future until they see whether the present rate rises are working as expected."

Stella Huangfu, University of Sydney (Increase): "Inflation for the past 12 months has been record high. Unemployment has remained at a very low level."

Nalini Prasad, UNSW Sydney (Increase): "While the effects of previous cash rate increases are still flowing through to the economy, underlying inflation remains strong. Inflation over the year to the December quarter 2022 was higher than expected by the RBA. The labour market remains strong. Monetary policy should be tightened to reduce inflationary pressures."

Mathew Tiller, LJ Hooker Group (Increase): "Despite the expectation that inflation will fall over the course of 2023, the latest quarterly CPI data release shows that it currently remains high."

Michael Yardney, Metropole Property Strategists (Increase): "While the RBA should wait to see how effective their 8 increases have been, they may be worried about leaving a rate rise too late, as happened early last year."

Craig Emerson, Emerson Economics (Increase): "The RBA will be spooked by the latest CPI figures."

Peter Boehm, Independent Director (Increase): "Inflation stubbornly towards top end of expectations and so the RBA will continue to raise rates until it starts reducing."

Tim Nelson, Griffith University (Increase): "Inflation is still tracking at high levels due to high demand as well as supply chain pressures."

Shane Oliver, AMP (Increase): "Underlying inflation surprised on the upside again in the December quarter and retail sales have remained solid so combined these are likely to tip the RBA over into another rate hike."

David Robertson, Bendigo Bank (Increase): "The latest CPI data revealing core inflation of 6.9% for 2022 has locked in another RBA rate hike in February to 3.35%, although this will mark the top of the inflation cycle so official rates should level off at 3.6% by May."

Dale Gillham, Wealth Within (Increase): "CPI is still rising and whilst it may be nearing its peak, the RBA does need to ensure this year that it is brought under control and the economy stabilised."

Matthew Peter, QIC (Increase): "Despite headline inflation nearing its peak, the RBA must continue delivering rate hikes at both their Tuesday meeting and in March. To not do so would invite market complacency that could result in too rapid an easing of financial conditions."

Stephen Halmarick, Commonwealth Bank (Increase): "High inflation."

Jeffrey Sheen, Macquarie University (Increase): "To consolidate the credibility of their inflation targeting."

Geoffrey Harold Kingston, Macquarie Business School (Increase): "Until around mid year it will look like 2 more 25bp rises will suffice. Then it will look like the budget has been too expansionary and wage inflation is too high. Late in the year there will be recession fears."

Rich Harvey, Propertybuyer (Increase): "Inflation figure is likely to come in around the 7% mark which is still way above the RBA comfort range."