ANZ and CBA sound rate hike alarm for November

Two of Australia’s big four banks on Thursday reversed their forecast for interest rates, predicting they will rise by 0.25 per cent in November.

The Australia and New Zealand Banking Group (ANZ) and Commonwealth Bank of Australia (CBA) believe Wednesday’s inflation figures will pressure the Reserve Bank of Australia (RBA) to lift the cash rate to 4.6 per cent in five weeks.

If that happens, it would be the highest cash rate setting the country has seen since October 2011.

The moves come after Wednesday’s figures put inflation for the 12 months to July at 3.5 per cent, and the all-important trimmed mean – the Reserve Bank of Australia’s favoured underlying measure – at 3.6 per cent.

The National Australia Bank (NAB) also confirmed on Thursday its cash rate forecast is under review on the back of the new inflation figures.

While the headline inflation figure was a 0.3 per cent slowdown from June and the trimmed mean was steady, both remain well beyond the 2-3 per cent target, and both were higher than market forecasts of 3.2-3.3 and 3.5 per cent respectively.

Prior to this, all big four banks were predicting the RBA’s next move would be a rate cut, albeit not until 2027.

But now economists believe the central bank has little choice but to raise the cash rate from 4.35 per cent when it holds a board meeting during the first week of November.

Impact felt by mortgage holders

A 0.25 percentage point rate hike in November would add about $91 to the monthly repayment on a $600,000 loan with 25 years remaining, according to comparison site Canstar.

Taking into account the four rises during 2026, the total increase to monthly repayments would be $363.

Canstar data insights director, Sally Tindall, says the ANZ and CBA u-turns are a reminder of how quickly forecast’s change. The stubborn inflation figures will force the RBA board to debate the merits of a rates hike when it meets in five weeks.

“For those with a $1 million mortgage, the impact is significant, adding an extra $152 per month to repayments.

“That’s an extra $605 these borrowers would have to stump up every single month compared to what they were paying at the start of the year.”

The RBA will hand down its next interest rates decision on September 29.

Building, takeaway food, fuel drive prices

The Australian Bureau of Statistics (ABS) on Wednesday identified three key drivers of inflation.

Housing costs were a chief culprit.

“Housing rose by 5.0 per cent in the 12 months to July due to rising costs for New dwellings,” ABS head of price statistics Rachael McCririck said.

“New dwellings prices rose 5.7 per cent in the 12 months to July as builders passed on higher costs for materials and labour.”

It also appears consumers have been enjoying dining out recently.

Annual food inflation is at 3.2 per cent for the 12 months to July, driven primarily by meals out and takeaway – that measure was up 4.5 per cent.

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And, in news that will come as no surprise to anyone who’s had to fill up the car in the last two months, petrol is also getting more expensive.

“On a monthly basis, Automotive fuel prices rose 7.5 per cent in July after falling for three months in a row,” McCririck said.

“This was driven by higher world oil prices and the partial unwinding of the federal government’s fuel excise relief measures in July.”