Australia Interest Rates: Mortgage Rise Expected for Mid-2022

Grim signs are starting to appear for Australian homeowners as the RBA is expected to have to make a dreaded move sooner than expected.

A sharp rise in inflation has led economists to predict that the Reserve Bank of Australia will be forced to raise interest rates as early as May.

There has been turbulence on the Australian Stock Exchange over the past week, with shares crashing to an eight-month low.

In yesterday’s trading, investors wiped $59 billion off the value of Australian shares, with the ASX 200 falling 2.5% to 6,961.6 points.

This is understandably driven in part by fears about global instability and a possible invasion of Ukraine.

However, more worrisome signs at the local level have spooked investors – soaring oil prices and soaring housing construction costs pushing the consumer price index higher than expected by 1.3% over the course of the year. of the December quarter. That’s up from a 0.8% increase over the previous three-month period.

The latest increase means that prices of daily consumer goods in Australia rose by 3.5% in total in 2021.

A 4.2% jump in the cost of new homes and a 6.6% rise in the price of fuel were the main factors behind this larger-than-expected increase.

The Reserve Bank, which meets next Tuesday, is expected to admit that an interest rate hike is likely later this year. The RBA previously ruled out a hike until the end of 2023.

RBA Governor Philip Lowe previously spoke down to rate hikes in 2022, saying it would be an “overreaction” to inflation data.

He had suggested that early 2024 was the most likely time for rates to start rising.

However, NAB economist Taylor Nugent told the FRG the latest economic figures are “probably consistent with a rate hike at the end of 2022″.

Josh Frydenberg said inflation in Australia remained half of what it was in the United States and lower than in Germany, Canada and Britain.

“Despite the global supply chain disruptions facing Australia, and indeed so many other countries around the world, the Australian economy is remarkably resilient,” the Treasurer said. The Australian.

Omicron sparks global economic uncertainty

Australia is not the only country facing a difficult year.

The Omicron variant of Covid-19 is creating an obstacle course for the entire global economy that will slow growth this year, especially in the world’s two largest economies, the IMF said overnight.

The Washington-based crisis lender cut its 2022 global GDP forecast to 4.4%, half a point lower than the October estimate, due to “hurdles” caused by the latest outbreak, although that these should begin to fade during the second quarter of the year.

“The global economy enters 2022 in a weaker position than expected,” the International Monetary Fund said in its quarterly World Economic Outlook (WEO) update, adding that “the emergence of the variant Omicron in late November threatens to reverse this tentative path to recovery.The outlook remains clouded by risks, including geopolitical tensions and a wave of price hikes hitting consumers and businesses that is expected to last longer than expected.

After last year’s strong recovery, when the global economy grew by around 5.9%, the IMF cut projections for almost all countries – with the notable exception of India – but these are the downgrades of the United States and China that had the biggest impact.

“These headwinds are expected to weigh on growth in the first quarter of 2022,” the report said.

“The negative impact is expected to fade from the second quarter, assuming the global surge in Omicron infections subsides and the virus does not mutate into new variants that require new mobility restrictions.” The fund once again stressed that controlling the pandemic is essential for economic prospects and urged widespread vaccinations in developing countries, which have failed even as advanced economies have begun rolling out boosters among their already highly vaccinated populations.

– with AFP

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