Could the RBA raise interest rates this year?

Dr Andrew Wilson, consultant economist at Bluestone Home Loans, said that the numbers didn’t necessarily reflect a steady economic trajectory.

“The low rate unsurprisingly fuelled predictions from the usual suspects of a surge in wages growth stoking higher inflation and resulting in RBA interest rate increases this year,” Dr Wilson said.

“The national result however was significantly influenced again by the NSW and VIC recoveries from the severe COVID lockdowns of previous months,” he noted.

According to Dr Wilson, the short-term outlook for the national labour market is anything but certain, as self-imposed voluntary lockdowns in the face of surging Omicron cases are likely to impact economic performance throughout this quarter at least.

“In those circumstances, employment will likely decline and unemployment rates will rise as the COVID roller-coaster continues,” he predicted.

In its most recent statement, the RBA stated its intention not to raise rates until the national growth of wages is “materially higher than it is currently”.

“This is likely to take some time and the board is prepared to be patient,” the statement added.

In light of this stance and the current economic environment, Dr Wilson said that “predictions of official interest rate rises as soon as August are clearly nonsensical”.

For now, the RBA’s current outlook for rate increases remains at 2024, which Real Estate Institute of Australia (REIA) president Hayden Groves said was supported by the latest consumer price index numbers from the ABS.

With the All Groups CPI increasing by 1.3 per cent for the December quarter and 3.5 per cent for the year, Mr Groves said the figures hinted at relatively stable monetary settings for the remainder of 2022.

“Whilst the increase in the analytical series are the highest for over six years, they remain within the RBA’s long term target rate of 2 to 3 per cent.”

“This suggests that there will be no immediate pressures on interest rates,” Mr Groves said.

But many are still looking to nations like New Zealand, where a rate increase was delayed in August 2021 before being handed down as expected in October and November, as a bellwether for Australia.

Peter Rose, chief revenue office at Forbury, commented on REB that the similar economic conditions and inflationary pressures facing each country made it reasonable to expect that Australia may follow suit.

He also forecast that a rate increase could shake up Australia’s property market in more ways than one, with investors potentially more likely to evaluate their portfolios, bringing stock onto the market, as low-cost loans dwindle.

Australians have been assured, however, that the effect of the RBA’s and APRA’s policies on home affordability will be closely watched throughout early 2022.

Speaking during a press conference in December, Treasurer Josh Frydenberg said the topic was “a discussion that I will continue to have with our prudential regulator APRA, with Phil Lowe as the governor of the Reserve Bank, in my discussions with them, because I do want to ensure we continue to get Australians into a home”.