'One more rate hike': Major bank warns of economic tightrope

One of Australia’s major banks said more interest rate pain was on the way for Aussies thanks to slowing economic growth and a lagging jobs market.

While Bendigo Bank’s chief economist, David Robertson, said there would be a reprieve this month as rates will most likely remain stable at 4.35 per cent, he admitted this was unlikely to last.

“In the absence of an immediate end to the Middle East conflict and a sharp, lasting fall in oil prices, one more rate hike is still expected this cycle, in November,” Robertson said.

“We are seeing an expected slowing in the economy as three RBA rate hikes, high energy prices, and global uncertainty weigh on demand, with the jump in unemployment to 4.5 per cent confirming that job growth is slowing.”

He said the Fair Work Commission’s decision to raise the minimum wage by 4.75 per cent would compel the Reserve Bank of Australia (RBA) to “maintain restrictive rates”, even though headline inflation fell to 4.2 per cent.

“As financial markets continue to trend toward fresh record highs, the rise in petrol and diesel prices, alongside shortages in key inputs like fertilisers, will continue to weigh on the economy,” Robertson said.

“While household spending has held up thus far, this uncertainty and cost-of-living pressures has pushed consumer sentiment to a record low.”

This has been reflected in plummeting auction clearance rates, as buyers stay home amid higher interest rates and impending changes to the budget.

Both are expected to see house prices remain static or fall.

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“Auction clearance rates were already declining leading up to the budget and are expected to slow further, suggesting capital city house prices will level off,” he said.

“Sydney and Melbourne are already seeing small declines, while other capitals and regional property have been more resilient.”

He supported the need for broad structural reform in Australia’s taxation system, but argued the reforms proposed by the government do not go far enough.

“The jury is out as to whether this can all be achieved without adjusting GST, to lower our dependence on personal income tax,” Robertson said.