Big Four Banks Warn Australians Prepare for Triple Rate Hikes Ahead
Synopsis
ANZ has joined the other big three Aussie banks in expecting three straight interest rate hikes from its local Reserve Bank. The day before, CBA, Westpac and NAB all revised their forecasts, leaving all four banks on the same outlook. A 25 basis point hike in the cash rate next Tuesday is now expected by the RBA, a second hike in May and a third also now coming up on forecasts. Stubbornly hot inflation, a tight labour market and rising oil prices connected to the Middle East conflict are pushing the banks toward that conclusion.
All four major Australian banks are now forecasting three consecutive increases in RBA rates. The last of the four big banks include, ANZ, CBA, Westpac and NAB. Growing inflation, an overheated jobs market and climbing oil prices are stoking the calls.
Highlights
- ANZ and the other three banks of Australia warned for three consecutive rate hikes.
- CBA, Westpac, and NAB all moved their forecasts the day prior to ANZ’s call.
- All four banks now see the RBA lifting rates by 25bp at its meeting next Tuesday.
- Pushing the forecasts are hot inflation, a tight labour market and rising oil prices due to events in the Middle East.
Triple rate hikes: ANZ tells Australians to be ready
ANZ has become the last of the big four banks to issue a warning that Australian mortgage holders should prepare for three consecutive interest rate hikes. ANZ made its call after CBA, Westpac and NAB all revised their cash rate forecasts the previous day. All of that means all four of Australia’s big lenders are now interpreting the economy the same way, and they have not got good news for borrowers.
The shift in predictions followed a series of data suggesting inflation is still running too hot, the jobs market is stretched tight, and the conflict in the Middle East is driving up oil prices in a way that’s likely to keep piling on price pressures throughout the Australian economy. The near-simultaneous move from all four banks tells you how clear the picture has become to those analysts watching this up close.
What Banks Now Expect From the RBA
The Big Four banks now all see the Reserve Bank raising the cash rate by 25 basis points next Tuesday. That in itself would not be surprising. But what’s different now is that the banks are calling for a second 25 basis point increase at the subsequent meeting in May, and a third hike is also on the list of options as well later in 2023.
Three consecutive hikes would be a major squeeze for Australian mortgage holders who have only recently started to ease after a hiking cycle that began in 2022 and was finally done by the start of 2024. And many borrowers built their financial lives around the notion that rates were near a peak. The implication of three further increases now being pencilled in by all four of Australia’s major banks is going to shift the mindset of many households very rapidly.
Why Have All the Banks Recently Changed Their Forecasts
All three reasons for the forecast change are occurring simultaneously. Inflation continues to sit above the Reserve Bank of Australia’s 2 to 3% target band and isn’t coming down quickly enough for comfort. The labour market remains extremely tight, keeping wage pressures elevated and making it difficult for inflation to abate on its own. And the conflict in the Middle East has propelled oil prices to their highest level in nearly four years, introducing a new channel of price pressure that wasn’t on anyone’s radar only months ago.
It gives the RBA very little room at all to sit on its hands when those three things connect. Cutting rates is no longer an option and sitting on the sideline makes it seem like they are falling behind. The banks have done their sums and, lo and behold, all four have arrived at the same answer, the RBA needs to act again, and probably more than once. That answer is going to cost money for Australians with a home loan.
FAQs
1. Which banks are forecasting 3 rate hikes?
Every single one of the big four banks, ANZ, CBA, Westpac and NAB, is now, projecting three consecutive RBA rate increases.
2. What is the next RBA meeting?
The RBA meets again next Tuesday, where all four banks see it lifting the cash rate by 25 basis points at that meeting.
3. Why are banks expecting further hikes?
Inflation is higher than target, the labour market is too tight and US oil prices rising from the Middle East conflict are accentuating price pressures.
4. What does that mean for mortgage owners?
Three rises would see an increase in the mortgage repayments of any borrower with a variable-rate home loan, and could further crush household budgets.
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