Interest rates: RBA Governor Philip Lowe to hike three more times before Christmas

The RBA’s crusade against inflation has recast the lives of many Australian families. Governor Philip Lowe will hit them again and again and again by year’s end, experts say.

After five rate rises in five months, the Reserve Bank of Australia has warned it is far from finished, leading some experts to forecast increases at each of the three RBA board meetings before Christmas.

Intensifying the attack on rampant inflation, Governor Philip Lowe and the board on Tuesday approved a fourth successive 50 basis point hike, lifting the benchmark cash rate from 1.85 per cent to 2.35 per cent.

Inflation, as measured by the Australian Bureau of Statistics’ Consumer Price Index, was up by 6.1 per cent in the year to the end of June — the fastest pace since the early 1990s.

The RBA expects the CPI to hit 7.75 per cent by Christmas. It wants to bring the CPI down to its 2 to 3 per cent target band, which it believes can be done by 2024.

In a statement, Mr Lowe said the latest increase “will help bring inflation back to target and create a more sustainable balance of demand and supply in the Australian economy. Price stability is a prerequisite for a strong economy and a sustained period of full employment.”

RBA Governor Philip Lowe. Picture: NCA NewsWire’s Jeremy Piper

But to achieve price stability, more hip-pocket pain will be meted out.

“The board expects to increase interest rates further over the months ahead,” Mr Lowe said.

Based on the Governor’s comments, Moody’s Analytics economist Harry Murphy Cruise is now forecasting 25 basis point increases in October, November and December.

“While we have inflation still rising we are going to have to have rate hikes to match it,” Mr Murphy Cruise told The Daily Telegraph.

Westpac chief economist Bill Evans is also predicting three more 25 basis point increases this year, plus another in February. The RBA board doesn’t usually meet in January.

Federal Treasurer Jim Chalmers said the latest hike “will tighten the screws on family budgets.

Treasurer Jim Chalmers and Prime Minister Anthony Albanese in Parliament on Tuesday. Picture: NCA NewsWire’s Gary Ramage

“This will put more pressure on a lot of Australians who are already stretched enough,” Mr Chalmers told parliament.

Opposition Treasury spokesman Angus Taylor said “the Albanese Government must make cost of living its top priority and respond to these challenges by developing a comprehensive plan to avoid making a bad situation worse.”

Mr Taylor said a homeowner with a mortgage of $750,000 would be paying around $900 more in monthly repayments than they were in May.

“That is a huge amount of extra cash to stump up month after month,” he said.

The figure referenced by Mr Taylor includes $213 a month because of the latest RBA increase.

‘IT’S CONSTANT STRESS’

When Sanket Doshi and his wife Archana bought their home in Sydney’s Quakers Hill last March, they had expected the housing boom to continue.

After the RBA lifted interest rates by another 0.5 percentage points on Tuesday both Mr Doshi and his wife are now worried about meeting their mortgage repayments.

“Before we never thought of the expense of our day to day, now we have to plan accordingly,” Mr Doshi said.

“We didn’t worry about how much we spent, how much we ate out, now I’m constantly thinking about it.”

Quakers Hill family the Doshis. Dad Sanket, Mum Archana, Anya (14) and Avika (9) now have to budget their day-to-day expenses and give up everyday luxuries like coffee. Picture: Julian Andrews

For Mr Doshi and his family, the extra cost has meant giving up certain luxuries such as buying coffee or eating out. He even tries to work from home more as it cuts down travel expenses.

An upcoming trip to India to visit family has become a source of stress due to the price tag.

“We wish we could postpone the trip, but we have to go because my father is unwell,” Mr Doshi said.

With mounting concerns about the cost of their mortgage, the family has postponed planned renovations of the house till 2023.

“Worst case we might need to downsize,” he said.

“It’s constant stress.”