RBA warns homebuyers with higher rates on cards as economy recovers
On an average Victorian mortgage of $ 634,000, a 2.5% cash rate would increase repayments by $ 849 per month or $ 10,188 per year. At 3.5%, monthly repayments would be $ 1,241 higher, while over a year, they would cost almost $ 15,000 more.
One of the reasons the financial markets are pushing the bank to raise interest rates next year is due to increased wage growth.
But Dr Lowe said that would mean reversing a 10-year pay cut, describing the likelihood of that happening in the next few months as “close to zero”. Figures to be released by the Australian Bureau of Statistics on Wednesday are expected to show an increase in wages from its current level of 1.7 percent.
However, he admitted that interest rates could start to climb before 2024, especially if global inflationary pressures become entrenched in international supply chains.
Finance Minister Simon Birmingham said Dr Lowe’s speech was a thoughtful approach to global inflationary pressures, which he called transitory.
He said the government was working to maintain high job growth and reduce unemployment to 4 percent in an environment where “interest rates remain low overall.”
âWe have created one of the most exceptional economic results in the world,â he said.
But shadow treasurer Jim Chalmers said the government was fleeing the fiscal and economic mess it created
“He’s a prime minister with a trillion dollar budget in debt and not enough to show it because he’s absolutely riddled with garbage and waste and mismanagement,” he said. “It has a record of low economic growth, stagnant wages, low business investment, low productivity, at all levels.”
Commonwealth Bank Australian Director of Economics Gareth Aird said it seemed the RBA was convinced the road back to higher inflation – and higher interest rates – was long.
Mr Aird, who expects the RBA to start raising interest rates in November 2022, said upcoming data on wages and inflation could stumble the bank’s plans.
âIt will be up to the official quarterly Australian inflation and wage publications to show that the profile of the RBA is too conservative given that the RBA has not used the offshore experience of inflation and higher wages as model for what can happen locally, “he said.
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