Aussies warned of a fourth rate hike within days as inflation fears ‘materialise’

Australians are being warned of a fourth rate hike this year as the Reserve Bank Governor Michele Bullock concedes her fears about inflation have materialised.

Speaking to a parliamentary committee on Friday, Bullock suggested the central bank had overshot its latest forecast that the 3.5 per cent inflation rate would return to the midpoint of the target range by late 2027.

“At the time of the August board meeting, we assessed that the risks to that outlook were skewed to the upside,” she said.

“Developments since then suggest that although growth in the Australian economy is slowing, some of these upside risks to inflation appear to be materialising.”

The Reserve Bank was clear at its last meeting in August that it would hike rates again if those risks materialise.

Bullock said global pressures – the Middle East conflict, the artificial intelligence boom and extreme weather events – are spiking costs that many firms are passing onto customers.

“There is little sign of resolution in the Middle East conflict. Oil and related prices have increased sharply again and will add directly to inflation,” she said.

“This was expected, but it is important that these effects remain contained and do not become embedded into price and wage setting decisions.

“Otherwise, inflation could prove more persistent and require a stronger policy response.”

Canstar data insights director Sally Tindall said Bullock has sent a clear message to mortgage holders that another hike is on the table at the next meeting later this month.

“RBA Governor Michele Bullock couldn’t have made it more clear in her address today that their revised trajectory for inflation is heading off course once again,” she said.

“The board has reiterated a multitude of times that it will hike again if inflation doesn’t come down as expected.

“With the next meeting just 11 days away, a hike will be front and centre of the discussions and with today’s comments now on the record it’s difficult to see how we could walk away with another pause.”

And there are fears of two more in the coming year as financial markets predict nearly three rate rises in the United States, Europe and Japan and more in the United Kingdom, Canada and New Zealand.

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Westpac has joined NAB and ANZ in hiking fixed rates in the last 24 hours by up to 0.45 per cent.

All four big banks expect a fourth hike of 0.25 basis points this year, with NAB predicting it in September while the remaining expect it in November.

This would add about $91 to the monthly repayments on a $600,000 loan with 25 years remaining, according to Canstar analysis.

Treasurer Jim Chalmers refused to be drawn in on fears of another hike, saying he is doing all he can from a budgetary perspective.

“The Reserve Bank will determine their part of that independently,” he told reporters.

“I’m not going to make a prediction about future movements in interest rates.”

Opposition Leader Angus Taylor blamed government spending and policy for the inflation problem regardless of how the Reserve Bank will act at its upcoming meeting.

“We are staring down the barrel of interest rate increases,” he told 2GB Radio.

“We’re going to have another decision the week after next, and the expectation is there’ll be an increase, and there’ll be further increases beyond that.

“But even if that wasn’t to happen, I mean, we’ve seen interest rates higher for longer.”

It comes a day after the International Monetary Fund urged the federal and state governments to rein in rising spending and public debt which surpassed $1 trillion to bring down inflation.

It also advised the Reserve Bank to stand ready to hike rates as needed.

“Public spending has increased steadily since the global financial crisis, and greater efforts will be needed to contain spending growth by strengthening efficiency and prioritisation,” the fund said.

“These efforts will be particularly important among more indebted states.”