RBA’s Decision To Raise Rates May Impact AU Economic Outlook

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The Reserve Bank of Australia (RBA) has decided to continue interest rates in February and March, and according to many experts, it may push the country into a consumer recession.

Global economic growth is expected to slow as world economies battle inflation. According to the latest Deloitte Access Economics Business Outlook, the expected slow economic growth will last longer than expected.

Stephen Smith, the lead author of the Deloitte report, noted that RBA’s “decision to continue raising interest rates in February and March will result in a consumer recession this year, with household spending expected to finish the year below where it started.”

The report also included that the RBA increased its official cash rate to 3.60% last month, the highest over a decade. The March increase is also the tenth consecutive increase, beating the record of rate increases since the early 1990s.

However, the RBA announced that it is moving towards pausing interest rate increases this month but has yet to hint at how long the pause would last, as it may resume its rate hikes if inflation does not show improvement.

The continuous increase in interest rates has already begun hurting homeowners who took out fixed mortgage interest rates in previous years. Smith added that in 2024, it is expected that a $600,000 mortgage would have increased by $14,000 due to the high-interest rates.

“But that’s just the average, and there are plenty of mortgage holders on either side of those numbers,” Smith added. 

Max Chandler-Mather, the Greens’ housing spokesperson, notes, “The higher interest rates go, the more negative gearing will cost the budget, which means right at the time when the government needs extra revenue to help alleviate the cost-of-living crisis, they are instead handing it over in the form of tax concessions to wealthy property investors.”

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