Rising inflation to see RBA hike rates by 50bp by December: CBA CEO Matt Comyn

Rising inflation will see the RBA lift rates by 50 basis points by the end of the year, according to the boss of Australia’s biggest bank.

Rising inflation will see the Reserve Bank raise interest rates by 50 basis points by the end of the year, says Commonwealth Bank boss Matt Comyn.

Speaking on the sidelines of a conference in Sydney, Mr Comyn said the latest inflation figures released on Wednesday which showed were “a bit stronger” than the bank had been expecting.

“It brings the prospect of rate hikes in November and December very clearly onto the table.”

Mr Comyn said the release of the inflation figures on Wednesday, which showed inflation running at 7.3 per cent over the year, would now see the RBA increase rates by 25 basis points at its meeting on Tuesday and another 25 basis points in December.

Mr Comyn said he supported the view of the Federal Treasurer that fiscal and monetary policy should be working in the same direction.

He said the world was now facing an “energy crisis” in the wake of the Russian invasion of Ukraine, which was pushing up prices by as much as 600 per cent for countries like Germany.

CBA was not expecting another rise in the bank’s February meeting, but he said that this would depend on the data to come out between now and then.

Mr Comyn said there was an “enormous amount of concern” globally, particularly in Europe, about rising energy prices and issues around energy security.

He said there was also concern that higher energy prices would flow through into the impact on household budgets in Australia, including food prices.

“It is a very significant issue to work through,” he said on Thursday.

CBA boss Matt Comyn expects two more rate hikes by Christmas following higher than expected inflation. Picture: Damian Shaw/NCA NewsWire

Mr Comyn, who has been at the helm of CBA since early 2018, said rising energy prices at the moment were largely due to “geopolitical factors” rather than the longer term pressure of decarbonisation.

But over time, Mr Comyn said there would be extra costs as a result of the transition to more renewable energy.

Mr Comyn said the International Energy Agency was about to put out a new outlook in its view of the global energy crisis.

“We are watching that carefully,” he said.

“Domestically, is it much more focused around what has been published in the budget and the price increases we have been seeing in wholesale markets flowing through into retail markets.”

Mr Comyn said many businesses in Australia would be facing “substantial increases” in their electricity bills when their current pricing contracts were renewed.

He said the world was now operating in a higher inflationary environment, with increasing concerns about energy security.

The banking boss said CBA was also watching closely the impact of higher energy prices in household spending.

He said higher energy prices would cut into household discretionary income.

“Higher energy costs are a reasonable proportion of any household expenditure.”

“If something is rising by more than 30 per cent over the next 12 months, that is a concern for us, for our customers and the economy.”

Mr Comyn said he did not agree that the Albanese government should be providing any financial support to people to compensate for higher energy prices.

But he said there were a “number of challenging issues” for the government to tackle in terms of what level of intervention it needed to do in energy markets “in some practical way to try to keep some restraint on prices.”

He said there was “not an awful lot” the federal government could do about the world energy crisis, noting that some European countries were facing 600 per cent increases in energy prices.

“In Australia, we are talking about 56 per cent.”

Mr Comyn acknowledged it was “really painful”, but added that countries in Europe were facing “really significant issues” in terms of higher energy costs.