RBA interest rates live updates: Michele Bullock’s board set to hike to 15-year high to rein in inflation

Fresh data out just hours ago may give the RBA pause to consider just how much pain its willing to inflict on households.

The Australian Bureau of Statistics figures show Australians hit the brakes on discretionary spending in August, with an 8.1 per cent jump in fuel spending keeping overall spending from going backwards.

Total spending was unchanged after gains of 1.1 per cent in July and 0.9 per cent in June, but strip out fuel and it fell 0.3 per cent.

Households shelled out more at the bowser after fuel excise was fully restored from August 3, even though experimental Australian Bureau of Statistics figures suggest they bought less fuel. The volume purchased fell 0.5 per cent in August after tumbling 4.6 per cent in July.

ABS head of business statistics Tom Lay said transport spending rose 2.3 per cent, helped by fuel and new vehicle sales, while consumers cut spending across much of the rest of the household budget.

“Recreation and culture spending saw the largest fall, down 1.4 per cent, after months of higher spending associated with major sporting events,” Mr Lay said.

Read more here ...

WA Treasurer Saffioti says a rate rise today would be “very disappointing” as mortgaged households cop financial pain on all sides.

Along with her Federal counterpart, Ms Saffioti pinned the blame on war in the Middle East.

“A lot of the inflation is very supply side-driven with what’s happening through the Middle East, Strait of Hormuz,” she said this morning.

“I’ve always said that monetary policy is very, very tough, it’s a blunt instrument and it impacts those that can least afford it.”

But she remained confident in WA’s financial credentials.

“There’s a lot of very strong economic fundamentals of WA,” she said.

“We want the confidence to remain and my fear is that sometimes these instruments, which are sometimes targeted at other States and Territories, also impact us.

“But as I said, we’re a strong economy, strong economic fundamentals, the inflation is very much supply-driven as a result of what’s been happening in the Middle East.”

A hike today will take the RBA’s official cash rate to a 15-year high.

Rates would not have been this high since November 2011, when they were cut 25 basis points to 4.5 per cent.

Few phrases create more anxiety for homeowners than negative equity.

It sounds alarming. It generates headlines. And for many Australians, particularly first-homebuyers who entered the market with smaller deposits, it can feel like a financial nightmare.

But before borrowers panic it’s important to understand what negative equity actually is, and what it isn’t, wrote Chris Foster-Ramsay, director of Foster Ramsay Finance, in this week’s Your Money in The West Australian.

Negative equity occurs when the amount owed on a home loan exceeds the property’s current market value. For example, if a homeowner owes $700,000 on their mortgage but the property is now worth $650,000, they are effectively $50,000 in negative equity.

On paper, that’s uncomfortable.

But in reality, negative equity only becomes a significant problem when a borrower is forced to sell, refinance or access equity while the property’s value remains below the loan balance.

Read more here.

Australia faces the worst housing downturn in 70 years as the likelihood of the fourth interest rate hike this year diminishes the borrowing capacity of prospective borrowers, a leading housing economist says.

An average, full-time income earner’s borrowing capacity would be $47,400 less compared with $94,700 for a dual income couple should the Reserve Bank hike rates today for the fourth time since February, Canstar calculated.

Independent housing economist Cameron Kusher said a 13 per cent national peak-to-trough downturn was likely, which would be worse than the 7.7 per cent downturn in 1982 and 1983 during a year-long recession and an 8.2 per cent drop between 2017 and 2019 following a crackdown on interest-only loans.

“I think it’s going to be one of the largest downturns we’ve seen probably in the last 60 or 70 years or so,” he said.

The combination of Labor’s Budget changes to negative gearing and capital gains tax concessions and another round of aggressive Reserve Bank rate hikes are conspiring to sink the property market.

“We haven’t had policy changes like that for a long time,” Mr Kusher said.

“Interest rates on an historic basis aren’t that high, but when you consider how high property prices are, that’s going to put further downward pressure on prices and that’s why we’re looking at this larger downturn.

“That really highlights that this downturn’s different.”

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The S&P/ASX200 is up just one point as investors sit on the sidelines and await the Reserve Bank’s next move.

The index was sitting at 8680.7 at 12.30pm AEST, held in the green but a massive 4.5 per cent leap in IT stocks.

Energy, real estate, utilities and banking stocks all lagged, with health care, miners and consumer discretionaries making marginal gains.

Money man David Koch may have hit the nail on the head last week when he said millions of bruised and battered households are “likely to be handed a bill they did not run up”.

Ms Bullock is at pains to say each time the official cash rate is increased to fight inflation that rising costs hurt everyone.

What’s not acknowledged is that the pain the RBA applies isn’t proportional.

Everyone pays the same for fuel, groceries, insurance and everything else that now costs more. But every rate rise hits just a third of the population that is unlucky enough to have a mortgage.

So what’s the source of this growing inflation?

Kochie, as economic director at Compare the Market, in an open letter to Ms Bullock and Co believes it’s time for a little honestly and he wants the board to “look closely at who generated that worryingly high level of growth”.

“It wasn’t households,” he said, adding a “meaningful slice” of inflation as it stands “it not being generated in a shopping centre. It is being set in a cabinet room”.

“Households complied. Governments didn’t seem to. Yet only one of those two gets the higher interest rate bill,” he wrote.

Consider these facts he lays out.

Read more here ...

Lenders - pardon the pun - bank on a mortgageholder’s complacency.

The hassle of phoning your bank and going round after round to squeeze just a 25 basis-point cut out of them seems more a chore than an exercise in saving a few dollars.

But those few dollars add up. Take a look at this from Canstar ...

Its research shows an owner-occupier who took out a new mortgage five years ago and hasn’t renegotiated their loan since, will land on a variable rate of 7.18 per cent if the RBA hikes today and their bank passes it on in full.

By switching to a highly competitive rate of 6.24 per cent, this borrower, assuming they have $600,000 remaining on their loan, could potentially save over $10,000 in the next two years, even when factoring in $1150 in switch costs, says Canstar.

With property sales falling, banks are again scrambling to not only find new customers, but also hold on to the ones they have.

The banks aren’t losing money in this rate hike cycle.

Don’t let yourself pay a loyalty tax without them having to earn your business.

With or without a hike today, a simple phone call could keep your family’s head above water.

As painful as just one more rate hike would be today, homeowners fear the Reserve Bank could still tighten the screws further.

ANZ economist Sophia Angala said persistent underlying inflation and the re-escalation of the conflict in the Middle East and higher oil prices had increased the risk of follow-up rate hikes.

“As a result, we expect the RBA to raise the cash rate by 25bp in both September and November 2026,” Ms Angala said.

Money-saving expert Joel Gibson said economists’ predictions would be a painful blow for households who had already exhausted ways to cut back their spending.

“We’re in uncharted territory now if we get any more rate hikes because it hasn’t been this high since I think 2011,” Mr Gibson said.

“There’s a whole iteration of borrowers who’ve never seen rates this high.

“A lot of people are already at their limit in terms of what they can possibly find to cut their spending, to save money wherever possible.

“But if rates keep going up, some people unfortunately just won’t be able to afford their mortgage.”

While financial markets are pricing in a 90 per cent chance the Reserve Bank will hike today, one expert says is a certainty if the central bank wants to maintiain its credibility.

RBC BlueBay Asset Management portfolio manager Malin Rosengren said the RBA held rates unchanged in August on the concession that if any upside risks to inflation materialised it would have to respond.

“July inflation data indicate both headline and trimmed-mean inflation remain elevated and show signs of strong momentum and widening breadth, and household spending continue to boom,” Ms Rosengren said.

“While there was a modest loosening in the labor market, it doesn’t seem to be enough to soften demand.

“At this point it should appear evident to the RBA that policy is not yet restrictive enough.

“If they fail to hike at the September meeting the market will turn to price in more inflation premia across the curve as the bank’s credibility will be tarnished.”