Another major bank is warning that the Reserve Bank could lift official interest rates above 4 percent. Westpac had been forecasting that the Reserve Bank would stop hiking rates at 3.85 percent it’s now saying that the board will most likely lift rates above 4 percent.
The bank believes interest rates will peak at 4.1 percent by May, which implies another quarter point hike in March, April and May. Both ANZ Bank and NAB also see rates hitting 4.1 percent but not until June. Taking a longer term look, Westpac says borrowers will be waiting until early next year for the first rate cut.
Westpac’s chief economist Bill Evans said the Reserve Bank is likely to be more aggressive in its rate hikes than previously expected. He believes that the central bank will need to lift rates higher to slow down the economy and keep inflation under control.
“The RBA has been very clear that it wants to see a moderation in economic activity and a return of inflation to target,” Evans said. “We believe that this will require a peak in the cash rate of 4.1 percent.”
With interest rates already at decade highs, Westpac’s warning could spell trouble for borrowers who are already struggling with high levels of debt. It also means that savers can look forward to higher returns on their deposits. The higher rates are expected to hit consumer spending, with the NAB predicting a 0.7 per cent contraction in the June quarter – which would be the first negative growth since March 1991.
It’s not just consumers who will feel the pinch either, with businesses also expected to suffer from higher costs and reduced demand. The NAB is forecasting GDP growth of 2.5 per cent for 2021, down from 3.2 per cent in 2020 and 4.3 per cent in 2019.
With a recession looming, it’s important to be prepared and take steps to protect yourself financially. Start by looking at ways you can reduce your debt levels, such as refinancing your mortgage or consolidating credit card debt into one loan with a lower interest rate.
You should also consider increasing your savings rate so you have more money available if needed during an economic downturn. Finally, make sure you have adequate insurance coverage for yourself and your family in case of job loss or other unexpected events that could affect your finances.
According to new research from AMP Bank, seven in 10 homeowners are worried about meeting their mortgage commitments if rates increase further. This is an increase of five per cent since October 2022.
With the Reserve Bank likely to keep lifting official cash rate hikes, it’s clear that Australian households are feeling the pinch.
Experts advise homeowners to consider ways of reducing their debt such as renegotiating a lower interest rate with their lender or consolidating debts into one loan with a lower interest rate.
Savers can also look for more competitive banking options and make sure they get the best possible return on their investments. Finally, it’s important to stay informed and up-to-date with changes in the housing market and financial markets so you can make smart decisions when it comes to managing your money.
With the Reserve Bank of Australia (RBA) keeping interest rates at a record low of 0.1%, economists are warning that Australia is at a heightened risk of recession in 2023.
The RBA has kept interest rates low to stimulate the economy and encourage borrowing, but this has led to an increase in household debt levels. This, combined with rising living costs and stagnant wages, has put many Australians under financial strain.
As a result, more than two thirds of homeowners have made changes to their household budgets to account for higher interest rates. This includes reducing spending on groceries, entertainment, clothing, holidays, and gifts.
While the Australian economy has managed to avoid recession for 27 years now, economists are warning that it could be heading towards one if interest rates remain too low for too long.
It remains to be seen whether Australia will be able to escape a recession in 2023 or not. In any case, it’s important for households to take steps now to prepare themselves financially for any potential economic downturns.
Sources:
- https://www.abc.net.au/news/2023-02-21/australia-to-flirt-with-recession-this-year-warns-nab/102002938
- https://www.nytimes.com/2023/01/06/world/australia/australia-recession.html
- https://www.rba.gov.au/education/resources/explainers/recession.html
Albion News is a great place to find informative, up-to-date news articles. We provide a wide range of unique articles that offer an interesting perspective on current events from around the world and from various different sources. You can easily search for the topics that matter most to you and explore in-depth pieces that provide insight into the issues and important debates occurring today. Albion News helps you stay informed with carefully researched and credible stories!
