- Analysts expect the RBA’s meeting on Tuesday to be a non-event.
- The RBA may maintain status quo on rates for some more time before moving from the record low of 0.1%.
- It also expects the rising housing prices to come down after the interest rate rise in 2023.
While the Reserve Bank of Australia (RBA) is scheduled to discuss the cash rate on Tuesday, analysts expect the meeting to be a non-event. The RBA may maintain status quo on rates for some more time before moving from the record low of 0.1%.
As per Westpac Banking Corp’s latest report, the RBA would keep rates on hold until early 2023, waiting for appropriate levels of inflation and wage growth that support a rate hike.
“We expect the RBA to begin raising the cash rate in February 2023. That will be in response to rising inflation (core inflation reaches 2.8% by end 2022) and increasing wage pressures (wages growth to 2.8% by year’s end),” Westpac’s Chief Economist, Bill Evans said. After the end of 2023, Westpac expects the RBA to raise the cash rate to 0.75%.
“The dynamics around the interaction of strong demand and constrained supply set the scene for these rising prices,” Evans added.
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Housing prices to cool down
Australia’s oldest bank expects the rising housing prices to come down in the wake of the expected interest rate rise in 2023. “However, just as we have not factored in a significant positive wealth effect in 2022 given the ample income and savings boost to demand, we would expect the fall in prices to impact confidence and future activity although household spending will hold up, particularly in the first half of 2023,” the report said.
The report added that households would continue to benefit from high savings. In 2023, the bank expects the savings rate to fall back to the historical norm of around 6%. Households will also see the benefits of the Stage 3 tax cuts which will lock in from July 2023, it added.
Meanwhile, the bank also lifted its forecasts for the GDP growth path through to December 2022, against earlier expectations for both pre-COVID-19 and pre-Delta periods. “Our revised forecasts have settled on a lift in GDP in the December quarter of 2.3% to be followed by growth of 6.4% in 2022,” it said.
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