Rising Inflation Pushes RBA to Consider Interest Rate Hikes in February
Rising Inflation Pushes RBA to Consider Interest Rate Hikes in February
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
The Australian economy is facing a likely increase in interest rates in February, as inflation hits its highest rate in 33 years.
The latest Consumer Price Index figures show that inflation reached 7.8% in 2022, with a 1.9% increase in the December quarter alone.
This increase in inflation is largely attributed to a post-pandemic spend-a-thon, with domestic holiday travel and accommodation rising 13.3% and international holiday travel and accommodation rising 7.6%.
Additionally, rents increased by 4% and power bills by 8.6%.
Measures of underlying inflation, such as the trimmed-mean inflation rate and the weighted median price, also came in at record highs. These statistics indicate that prices are increasing rapidly across the Australian economy.
The Reserve Bank of Australia (RBA) is expected to increase interest rates by 0.25 percentage points at its next meeting on February 7th and likely several more times throughout 2023 in order to fulfill its mandate of keeping inflation between 2% and 3%. Higher interest rates will encourage households to spend less and save more, and will also make the dollar more valuable. This will help to make imports cheaper and will also lead to higher loan repayments for households with a mortgage.
While economists expect inflation to have peaked, the pace at which it will then fall is still uncertain. If rents continue to rise or wage growth picks up, it's possible that the CPI will continue to rise, resulting in the RBA lifting rates. However, if the rate of inflation starts to fall more quickly towards the 2-3% target band, the RBA may not need to increase interest rates as much.
Overall, there remains a high degree of uncertainty in the outlook of the Australian economy. Policymakers will need to remain flexible when setting macroeconomic policy and be ready to adjust interest rates as the economy changes.
Published:Friday, 27th Jan 2023 Source: Paige Estritori
Please Note: If this information affects you, seek advice from a licensed professional.
The Australian Prudential Regulation Authority (APRA) has announced new measures to limit high debt-to-income (DTI) home loans, effective from 1 February 2026. Under these regulations, banks and other authorised deposit-taking institutions are restricted to allocating no more than 20% of new home loans to borrowers with a DTI ratio of six times or more. - read more
The Reserve Bank of Australia (RBA) has raised the cash rate by 25 basis points to 3.85% in its February meeting, responding to a resurgence in inflation during the latter half of 2025. This decision marks the first rate hike in over two years and aims to curb inflationary pressures that have re-emerged despite previous rate cuts. - read more
Australia's housing market is poised for continued growth in 2026, with economists forecasting a 5% increase in house prices over the next 12 months. This projection follows an 8.6% rise in 2025, marking the strongest annual growth since 2021. The anticipated growth is primarily driven by demand outstripping supply, a trend observed across all states and territories. - read more
If you are seeking lower rates, lower fees and more flexibility in your home loan. you are in luck! Our national panel of mortgage brokers is looking forward to an opportunity to assist you. Apply online for a free eligibility assessment and one of our broker network refinance specialists will get on the case to track down the best deal for your individual circumstances. Without any obligation and at no charge to you!
Personal loans are a type of unsecured credit that allows individuals to borrow money for various personal expenses, including consolidating debt, making home improvements, or funding significant life events. Unlike secured loans that require collateral, personal loans rely on your creditworthiness, making them an accessible option for many Australians. - read more
Welcome to the digital age, where online loans in Australia offer convenience and accessibility like never before. With a few clicks, financing for your next big purchase or consolidation of existing debts is at your fingertips. However, venturing into the world of online lending without a compass can leave you navigating choppy waters. - read more
Debt consolidation is a strategy often utilized by individuals seeking to take control of their financial health. At its core, debt consolidation involves combining multiple debts into a single, more manageable loan, typically with more favorable terms such as a lower interest rate or a longer repayment period. - read more
Knowledgebase
Negative Amortization: A situation in which the loan payment for any period is less than the interest charged over that period, causing the loan balance to increase.
