‘Real risk’ RBA will take interest rates past 4pc this year: ANZ

A senior ANZ economist says there’s now “a real risk” the Reserve Bank will increase the official interest rate to more than 4 per cent this year – higher than most banks expected.

Brisbane is expected to hang on to a lot of the property price gains it’s had since 2020. Picture: Brisbane City Council

A senior ANZ economist says there’s now “a real risk” the Reserve Bank will increase the official interest rate to more than 4 per cent this year – higher than most banks expected.

ANZ senior economist Felicity Emmett, who headlined the Property Council’s Qld Market Outlook in Brisbane Friday, said “there’s certainly a risk now that the cash rate goes above 4 per cent, a very real risk that we see that this year. Part of that is because spending is still pretty strong.”

Economists began revisiting peak interest rate forecasts Tuesday after the RBA increased its cash rate target to 3.35 per cent, warning more rises were coming, with the matter compounded on Friday when trimmed mean inflation expectations were increased by half a percentage point to 4.25 per cent for December 2023.

ANZ senior economist Felicity Emmett says Brisbane is in a good position to manage any slowdown in demand.

MORE: Win your own Qld island paradise for just $2

Homeowners face 50 per cent rise in mortgage repayment costs

“We’ve said for some time that the risks are tilted to a higher cash rate, and I think the (RBA) statement on Tuesday really highlights those risks and (Friday) we’ve had the RBA upgrade their trimmed mean inflation forecasts, so again it just highlights that there’s much more likelihood that we’ll get something above four (4pc),” Ms Emmett said.

The property market was expected to be weak across the board this year, but Brisbane prices would remain elevated compared to pre-pandemic levels.

“We do expect there to be property market weakness given the increase in interest rates, but Brisbane is likely to hang on to a lot of the pandemic gains in house prices,” she said.

“All of Australia is going to see a slowing in demand, but Brisbane is in a really good place to manage that given the strength in population growth and the infrastructure pipeline.”

Ms Emmett said ANZ had not changed its peak forecast as yet, with the bank still showing an expectation of RBA topping out at 3.85 per cent come May 2.

FOLLOW SOPHIE FOSTER ON TWITTER