Don’t rule out another interest rate rise next month, top economist warns

Australia’s falling headline inflation data may have been enough for many economists to backtrack on predictions of an interest rate rise next month, but one expert has warned it’s far from a done deal.

In its monthly property report, released this morning, real estate valuation and advisory firm Herron Todd White said mortgage holders would be wrong to breathe a sigh of relief just yet.

Australian Bureau of Statistics figures, released yesterday, showed trimmed mean inflation rose to 3.6 per cent in the June quarter from 3.5 per cent in March, coming in below both market expectations and the central bank’s forecast of 3.8 per cent.

Money markets accordingly slashed the odds of a rate increase at the next RBA meeting to just 4 per cent, while major forecasters including AMP and Westpac reversed their predictions for an August rate hike.

However, Herron Todd White Chief Economist Cameron Kusher warned that lingering inflationary pressures mean the Reserve Bank of Australia could still move to lift the official cash rate when its board meets on August 11.

“After three 25 basis point increases to the cash rate in the first three meetings this year, the RBA decided to keep the cash rate on hold last month,” Kusher said.

“But with inflationary pressures persisting, we certainly shouldn’t count out the potential for a further increase in the cash rate over coming months, possibly as early as next meeting.”

Inflation stubbornly above RBA target

Despite coming in under forecasts, both headline and underlying inflation remain uncomfortably above the RBA’s target band of 2.0 to 3.0 per cent.

Kusher noted that headline inflation sat at 4.0 per cent over the year to May, while the underlying measure remains at elevated levels not seen since late 2024.

The persistent price pressures come as household budgets across the nation continue to feel the strain of cost-of-living pressures.

Read more

The $4100 hammer blow crushing Australians everywhere

According to recent economic data, household grocery bills, fuel prices, and insurance premiums have continued to climb, offsetting relief in other consumer categories. 

Essential goods and services have seen far stickier price growth than discretionary items, keeping overall living costs elevated for working families.

Borrowers under mounting pressure

The warning comes as Australian households grapple with a rapidly slowing housing market and shrinking disposable income following a relentless series of rate hikes.

Kusher pointed out that national home value growth has slowed sharply across the country, with prices dropping 0.7 per cent over the past three months as buyer confidence wanes under high borrowing costs.

With the cash rate currently sitting at 4.35 per cent, any further move by the RBA on August 11 would push average variable mortgage rates above 6.5 per cent, adding hundreds of dollars more to monthly repayments for typical homeowners.