Interest rates decision LIVE updates: Millions of Aussies bracing for the worst as RBA to hand down call

While August’s household spending slowdown is extremely unlikely to have much bearing on today’s interest rates decision, it could impact the RBA’s last two meetings of the year, in November and December.

If it is, as some economists suspect, the start of a proper spending downturn, it could spare borrowers from a fifth rate hike of the year.

“We don’t think the Reserve Bank would necessarily worry about today’s downside surprise in spending just yet,” AMP economist My Bui said.

“While nominal growth was weak and volumes likely contracted, they were partially corrections of previous months’ upside surprises.

“But looking forward, we think that this result could be the start of the decline in spending momentum.

“With today’s likely rate hike, households will continue to be hit by a double whammy of higher mortgage payments and higher fuel prices (and probably more fuel surcharges), while businesses are negatively impacted by higher input costs and borrowing rates, which means the labour market will likely slow from here.

“Rate hikes so far haven’t significantly slowed inflation, but a 4.6 per cent cash rate will make a further dent in consumer sentiment and spending intentions.

“Our base case is that inflation and economic data will slow further into year end, where the Reserve Bank could keep rates at 4.6 per cent rather than hiking further as implied by money markets.”

Some more on that household spending data.

Oscar Guth, an economist and Oxford Economics Australia, says anaemic spending growth is something we’ll probably need to get used to over the next 12 months.

“Cracks have started to show in household spending; spending was unchanged in August after three months of stellar growth,” he said.

“Households are starting to trim the extras. Discretionary spending fell 0.3 per cent on last month, led by recreation and culture, while clothing and household furnishings also lost ground…

“We expect the slowdown to deepen over the coming year as a more hawkish RBA, weaker consumer confidence and renewed fuel-price pressures squeeze household budgets.”

Prime Minister Anthony Albanese has jumped to defend Treasurer Jim Chalmers ahead of a likely fourth interest rate rise and a failure to reduce government spending to help curb above-target inflation.

Speaking to reporters in Adelaide, he blamed global conflict for some of the financial pressures at home.

“We’ve had two wars, to be fair, that have impacted on the price of fuel, and the truth is that when you have fuel increases, as you’ve had as a result of the war in the Middle East,” he said.

“And what you’re seeing is inflationary pressures being a global phenomenon, which is why you’ve seen interest rate increases, including just in the last fortnight in the United States and in other advanced economies.“

In a message to households awaiting more bad news when the Reserve Bank hands down its decision in about two hours, Albanese acknowledged the financial pressure they are under.

“We’ll continue to look at measures, but we’ll continue also to bear in mind that any measure we don’t want to have a further impact on on inflation, and to bear in mind the fiscal position that that represents,” he said.

Chalmers was doing the media rounds this morning, where he also blamed the wars in Iran and Ukraine for the financial situation in Australia. 

It appears Aussies are already feeling the pinch of the rising cost of living before today’s likely rate hike.

The Australian Bureau of Statistics has just released its latest household spending indicator data.

It shows spending was flat in August, but the numbers under the hood tell a more austere story.

Plenty of major discretionary spending categories – things like recreation and culture, clothing, furniture and footwear – dropped last month, while our outlay on transport costs was up 2.3 per cent.

That is almost solely related to the war in Iran, either in the form of paying steeper petrol prices, or motorists buying electric vehicles to escape those hefty whacks at the bowser.

“Recreation and culture spending saw the largest fall – down 1.4 per cent – after months of higher spending associated with major sporting events,” ABS head of business statistics Tom Lay said.

“Clothing and footwear, recreational goods, food, health, and furniture also fell.

“These falls were offset by higher transport spending – up 2.3 per cent - leaving overall household spending unchanged from July.

“Both fuel spending and new vehicle sales contributed to this rise, especially electric vehicle sales as households respond to rising fuel prices.”

If you took fuel spending – which was up a whopping 8.1 per cent month-to-month – out of the data, households would have spent 0.3 per cent less in August than July.

So clearly, Aussies are starting to pull back where they can.

Treasurer Jim Chalmers was doing the media rounds this morning when he was asked about the persistently high inflation that will almost certainly lead to a rate hike this afternoon.He said that issue has been made much worse by the war in the Middle East.“We do have an inflation challenge in our economy, I think that’s self-evident,” Chalmers told Today.“That’s made much worse by the developments in the Middle East, this long war which is pushing up global oil prices and flowing through to all of our economies, pushing up inflation and interest rates right around the world.“We’re managing the budget in a responsible way, we’ve got spending as a share of the economy down considerably.”It’s worth noting a couple of things here.First: yes, the Iran war has undoubtedly had an inflationary impact on Australia. The price of oil has surged – a particularly sore point for an economy so reliant on diesel – but so too has that of other goods and commodities, including fertiliser, which has impacted the agriculture sector.However, if you take a look at the below graph, you’ll notice both headline and core inflation began their march out of the RBA’s target band last year – well before Israel and the US launched their surprise attacks on Iran.

It wasn’t so long ago that the major banks were predicting rates had reached their peak, and that the RBA’s next move would be a cut, albeit not until next year.

But now the market has priced in a roughly 90 per cent chance of a hike today.

So why the change?

As always, it largely comes down to inflation.

While headline inflation slowed slightly in July – the last month we have data for – it didn’t tail off as much as expected, and core inflation remained steady.

Both figures remain well beyond the RBA’s 2-3 per cent target range, at 3.5 and 3.6 per cent respectively, and aren’t expected to come back to the middle of that sweet spot for more than a year.

While unemployment ticked up to a multi-year high last week, the jobless rate is still low by historical standards, and stronger-than-expected GDP figures released earlier this month suggested the RBA can hand down a hike without risking the economy grinding to a halt.

Put all of that in the context of inflation having been too high for too many years, and we have a compelling argument for a hike today.

As we mentioned in our last post, the Reserve Bank will announce its interest rates decision at 2:30pm (AEST) today.

An hour later, at 3:30pm, RBA Governor Michele Bullock will stand up for her regular post-meeting press conference where she’ll provide some more detail about the bank’s decision.

In the hour in between, we can expect to hear from Treasurer Jim Chalmers, as well as his opposition counterpart, Tim Wilson.

And assuming the RBA, as expected, hands down a hike, we’re also likely to hear from the major banks this afternoon as they announce when their customers are going to be impacted by higher rates – those statements will probably come in dribs and drabs from 2:30pm onwards.

Hello and welcome to nine.com.au’s live coverage of the Reserve Bank of Australia’s September interest rates decision.

Borrowers have been handed a reprieve at each of the RBA’s last two meetings, with the official cash rate on hold at 4.35 per cent since May.

However, that run of pauses appears almost certain to come to an end this afternoon, when Governor Michele Bullock and her board widely expected to hand down a fourth interest rate hike of the year.

The decision will be published at 2:30pm (AEST), but there’s plenty for us to cover off between now and then, so stay with us as we bring you everything you need to know about today’s interest rates call.