Bets are on as 69% of experts predict rate hike on Melbourne Cup Day

Despite the big race running, all eyes will be on the RBA in a decision that could halt the nation, as the majority of experts tip a rate rise.

In this month’s Finder RBA Cash Rate Survey™, 45 experts and economists weighed in on future cash rate moves and other issues relating to the state of the economy.

More than two-thirds of the panel (69%, 31/45) believe the RBA will raise the cash rate in November, leaving 31% (14/45) predicting a hold.

Of those forecasting a hike, all (100%, 31/31) are anticipating a rate rise of 25 basis points – bringing it to 4.35%.

Graham Cooke, head of consumer research at Finder, said it was shaping up to be the rate that stops the nation for the second year in a row.

“Inflation is falling but not as quick as many had hoped, giving the RBA reason to lift the cash rate on Tuesday.

“The effects of previous hikes are only starting to take effect, so another rate rise could spell disaster for many homeowners.”

The panel's forecast for the cash rate peak has now increased slightly from an average of 4.30% to 4.40% – indicating a growing consensus of another cash rate increase.

Geoffrey Kingston from Macquarie University Business School is predicting a rate hike with inflation in September somewhat higher than expected.

“This will probably trigger a rise on Melbourne Cup day but may be the last rise in this cycle,” Kingston said.

Dale Gillham from Wealth Within is expecting a hold seeing as recent economic figures demonstrate our economy is largely flat.

“Adding another rate rise onto an already stressed economy does not seem warranted,” Gillham said.

 

Experts predict rental prices will continue to rise in 2024

Almost all experts who weighed in* (87%, 26/30) do not believe that average rental prices have peaked.

Just over 4 in 5 panellists (81%, 25/31) say rental prices will continue to climb in 2024.

Finder’s Consumer Sentiment Tracker reveals almost half (42%) of renters struggled to pay their rent in October – up from 29% in October 2021.

Cooke said renters can only absorb so much of the burden from rising costs.

“Continued rent hikes are forcing many tenants to make some difficult decisions.

“Some are having to lower their standards and accept some really unpleasant living situations.

“The crisis is creating a cycle of financial instability, limiting renters' ability to save and pursue other financial goals,” Cooke said.

Mala Raghavan from University of Tasmania cited low housing stock coupled with rising migration as the main reason rental prices will continue to rise.

Michael Yardney from Metropole Property Strategists agreed.

“There is a severe shortage of rental accommodation at a time of increasing demand due to immigration,” Yardney said.

Millions of Aussies no longer aspire to own a home

The Government has proposed a “Help to Buy” scheme which will allow Australians to buy a home in a share equity plan with the government with as little as a 2% deposit.

Just over half of experts (56%, 15/27) do not believe this is a good policy.

Shane Oliver from AMP said the policy would do little for supply, but rather increase demand.

“Such schemes like home buyer grants or other low deposit schemes just help boost demand when the problem is a lack of housing supply.

“So while such schemes are popular as they “look” like they are helping buyers in reality they are just making housing less affordable,” Oliver said.

Finder research shows almost half of non-homeowners (49%) – equivalent to 4.1 million people – no longer aspire to own a house.

The research found 31% don’t think they will ever be able to afford to buy a house, while 18% would rather rent.

Almost a third (31%) are still hopeful about the prospect of owning a home one day but have accepted it won’t be for a long time, as prices continue to rise.

Just 1 in 5 (20%) are confident they will buy something soon, including 5% who are already on the hunt.

Cooke said plenty of Australians have given up their dreams of owning a home.

“Rising interest rates and house prices have seen some prospective buyers priced out of the market.

“Scraping together a deposit is a huge hurdle many have accepted will take a long time to do without assistance,” Cooke said.

*Experts are not required to answer every question in the survey

Here’s what the Funder experts had to say:

Shane Oliver, AMP (Increase): “Underlying inflation for the September quarter came in well above RBA forecasts, likely resulting in a “material” increase in RBA inflation forecasts for which it has indicated little tolerance. That said, it's a close call given political pressure, the absence of an RBA deputy on the board at present and our own view is that they should hold.”

Anthony Waldron, Mortgage Choice (Increase): “Since taking on the role of Governor of the Reserve Bank of Australia, Michele Bullock has been clear that another cash rate increase is not off the cards. With the Australian Bureau of Statistics showing a 1.2% rise in inflation over the September quarter and a seasonally adjusted fall in the unemployment rate, the data points to a cash rate hike in November.”

Alan Oster, Nab (Increase): “Inflation still higher than RBA would like. Expect higher unemployment will see cuts late next year.”

Leanne Pilkington, Laing+Simmons (Increase): “The Reserve Bank may feel its hand is being forced by higher-than-expected inflation but this has been driven by surging prices for non-discretionary items. We believe rates should remain on hold to protect mortgage holders, many of whom are on the brink, and most of whom have already curbed discretionary spending out of necessity.”

Andrew Wilson, My Housing Market (Increase): “Belated increase now likely by the RBA following questionable pauses over recent months in the face of a clearly continuing strong economy - and with still too-high inflation now consistently on the rise.”

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Peter Munckton, Bank of Queensland (Increase): “Inflation was higher than RBA forecasts.”

Matthew Greenwood-Nimmo, University of Melbourne (Increase): “At the RBA's October meeting, members expressed concern about upside risks to inflation and noted that further tightening may be required if inflation proved more persistent than expected. The latest inflation data has come in somewhat higher than expected, adding weight to the case for a rate hike.”

Cameron Kusher, REA Group (Increase): “Inflation is not falling in line with RBA forecasts and after having talked tough on the RBA's preparedness to lift rates if required, the new RBA Governor would look weak if we didn't get a rate hike on the back of the latest numbers.”

Angela Jackson, Impact Economics and Policy (Increase): “Latest data points to the need to slow the economy further to bring down inflation. This needs to be weighed against the current per capita recession and the risks of higher unemployment.”

Nicholas Gruen, DYSCALL PTY. LIMITED (Increase): “Because they're getting worried about inflation.”

Garry Barrett, University of Sydney (Increase): “Inflation remains persistently too high.”

Sean Langcake, Oxford Economics Australia (Increase): “We think the strength in core inflation in Q3 constitutes the type of upside surprise Governor Bullock has said would warrant tighter policy. If the RBA is losing patience and wants to guarantee the return of inflation to target, it is unlikely they will see a 25 basis point move as being enough to get the job done.”

Jason Azzopardi, Resimac (Increase): “Inflation data is too high to not require further tightening.”

David Robertson, Bendigo Bank (Increase): “The latest CPI data leaves the RBA board with little choice but to increase the official cash rate again in November given the acceleration in Q3 inflation. Another possible hike to 4.6% in February will then be dependent on Q4 CPI, released on January 31st.”

Kyle Rodda, Capital.com (Increase): “After last week's CPI data, the "glide path" for inflation at current policy settings is higher than what the RBA expected.”

Nalini Prasad, UNSW Sydney (Increase): “Inflation for the September quarter surprised on the upside indicating that there are still inflationary pressures in the economy. Of particular concern is strong services inflation.”

Stephen Miller, GSFM (Increase): “Inflation will be too high.”

Stephen Halmarick, CBA (Increase): “RBA tightening bias and higher inflation.”

Brodie Haupt, WLTH (Increase): “Inflation continues to persist. There was a stronger-than-expected CPI result for the September quarter, oil prices have remained high, as well as petrol prices. To top this off we have a depreciating Australian dollar.”

James Morley, The University of Sydney (Increase): “The latest inflation report confirms that we are past the peak and inflation looks like it will gradually return to the RBA’s 2-3% target range. However, there are enough components of inflation that surprised on the upside in the report and the RBA will want to ensure longer-term inflation expectations remain anchored at low levels despite another spike in volatile energy prices that is hopefully less persistent than with the War in Ukraine. Also, more robust global economic conditions and domestic financial conditions both suggest the risk of recession is receding. Thus, the RBA has room to raise rates at the next couple of meetings in response to inflationary pressures while still likely achieving a soft landing. I suspect that domestic components of inflation will make more progress back towards target before the February meeting and then the RBA will hold unless there are further domestic or global shocks (which there may well be given the geopolitical situation).”

Matthew Peter, QIC (Increase): “The September CPI outturn has all but sealed a rate hike from an RBA that has set a hawkish tone under new Governor Bullock. For the RBA not to hike, would risk Governor Bullock's credibility and see her stumble at her first hurdle.”

Malcolm Wood, Ord Minnett (Increase): “Worse than expected cost pressures and high likelihood of Stage 3 tax cuts.”

Peter Boehm, Pathfinder Consulting (Increase): “Whilst inflation may be reducing it is not falling fast enough. It’s around three times the RBA’s target rate. Significantly, inflation in the services sectors is increasing substantially i.e. petrol is up 20% on this time last year and there is no sign it is likely to reduce anytime soon. The newly appointed RBA Governor Michele Bullock has made it clear she is hawkish on rates - she has to be because ineffective Federal Government policy on inflation means interest rate adjustments is the only lever available to curb inflation. Sadly though, increasing rates puts additional pressures on struggling households which is manifesting in alarming impacts e.g. increasing mortgage arrears and consumers dropping private health insurance because they simply can’t afford it anymore. There simply has to be better coordination and policy development between the RBA and Federal Government, whilst maintaining the independence of both.”

Nicholas Frappell, ABC Refinery (Australia) (Increase): “It looks as if the CPI print is material after all.”

Mathew Tiller, LJ Hooker Group (Increase): “Despite inflation continuing to soften, it has not done so at a fast enough pace, nor as swiftly as the RBA had forecast. Additionally, recent comments from the new RBA governor, indicating a willingness to raise rates if inflation remains sticky, suggest that it is highly likely they will lift rates at their November board meeting.”

Tony Sycamore, IG Markets (Increase): “We are looking for a rate hike in November as the RBA continues to battle high inflation and a resilient labour market before an extended period on hold.”

Harry Murphy Cruise, Moody's Analytics (Increase): “Aussie inflation isn’t playing ball. Across the September quarter, underlying inflation rose for the first time on a quarter-on-quarter basis since September 2022. That higher-than-expected September inflation print likely seals the deal for a further rate hike in November. In her first speech as Governor, Michele Bullock noted “the Board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation. A material upward revision is just what occurred in the latest data. The next rate decision will come just half an hour before the running of the Melbourne Cup. And while that will be the “race that stops the nation”, the RBA board will be hoping the preceding hike will be the “rate” that stops it too.”

Associate Professor Mark Melatos, School of Economics, University of Sydney (Increase): “Inflation remains above the RBA's target band and could potentially remain elevated for an extended period due to the impact of rising rents, geopolitical tensions and the depreciating Australian dollar. There is inconclusive evidence as to the extent of the dampening impact of monetary tightening on consumption. Moreover, house prices appear to have shrugged off the rate increases to date.”

Geoffrey Kingston, Macquarie University Business School (Increase): “The inflation print for September was somewhat higher than expected. This will probably trigger a rise on Melbourne Cup day but may be the last rise in this cycle.”

Saul Eslake, Corinna Economic Advisory Pty Ltd (Increase): “Following the slightly higher-than-expected September quarter CPI figures, and Governor Michelle Bullock's statements about the RBA's "low tolerance" for higher-than-expected inflation, a 25 bp increase at the November meeting has become a live possibility. Although the higher-than-expected Sep qtr number was largely attributable to factors that won't be affected by a further tightening of monetary policy (petrol, utilities, insurance), and the annual inflation figures are still heading in the right direction, I suspect the RBA Board will feel compelled to back their warnings about "low tolerance" with some further action.”

Tim Nelson, Griffith University (Increase): “Inflation figures indicate a reversal of the deceleration that has previously been relied upon to hold rates steady.”

Michael Yardney, Metropole Property Strategists (Hold): “While most commentators believe rates will rise, I don't think the RBA will hike rates in November. The trend of core inflation remains down and two major factors leading to an increase in the September quarter CPI were fuel and rents, which will not be directly affected by raising rates again and will in themselves take money out of consumers pockets helping slow down spending. The RBA can wait a little longer to see how things pan out.”

Mala Raghavan, University of Tasmania (Hold): “The RBA is expected to maintain the cash rate at 4.1% in October. Nevertheless, the inflation rate surged in September to 5.6%, surpassing August's 5.2%. The consecutive rise in the monthly inflation rate is a cause for concern, as it tests RBA’s patience in holding the cash rate. As mentioned previously, the CPI data provided by the ABS reveals continuous troubling trends in some essential items (automotive fuel, bread, dairy, rent, electricity, and gas), elevating the cost of living pressure, particularly for vulnerable households in Australia. The question remains if a cash rate hike can ease the price pressure on these items as, in many cases, the inflationary pressure is not caused by excessive demand.”

Evgenia Dechter, UNSW (Hold): “Inflation in the September quarter came in higher than expected. However, considering the global uncertainty and domestic activity indicators, the RBA is likely to hold.”

Mark Crosby, Monash University (Hold): “Signalling one more rise to come, though I think it won't be this year.”

Jeffrey Sheen, Macquarie University (Hold): “Inflation is definitely coming down, perhaps not as fast as some would expect or like. However the current pace is consistent with a soft landing, which is surely preferable to the alternative. The RBA Board should not raise the cash rate on Melbourne Cup day, and I expect they will not take the risk.”

Cameron Murray, Fresh Economic Thinking (Hold): “Inflation is falling in Australia and globally, more so for producer prices, and the lagged effect of previous rate rises is still to be felt.”

Stephen Koukoulas, Market Economics (Hold): “Weaker economy, rising unemployment and inflation on track to hit target.”

Adj Professor Noel Whittaker, QUT Business School (Hold): “The RBA is in challenging territory – it wants to see inflation drop, but increasing interest rates will not affect the inflation rate. This is because of the money the government is plunging into the system, the influence of migrants putting pressure on the rental market and external factors such as the price of oil. Giving homeowners even more pain will not affect this one bit. Also companies like Harvey Norman and JB Hi Fi are reporting declining sales. My wish is that the RBA will take the wise course and hold rates.”

Rich Harvey, Propertybuyer (Hold): “The RBA is watching the underlying measures of inflation like a hawk and their language remains resolute in taming the inflation beast to get into line within their stated time frame of end of 2025 for the 2% to 3% range. The RBA is aware of the current pain that higher rates are inflicting and may look for one more hike pre-Christmas if they see that it is not trending down fast enough.”

Stella Huangfu, University of Sydney (Hold): “Inflation is still high. It seems to me that RBA needs to increase the cash rate for at least one more time this year: either November or December. Two rounds of rate increase back-to-back is highly unlikely. Compared to November, December is a better time for another rate hike given the next board meeting after that would be Feb 5. This would ensure inflation will not go out of control during the holiday spending season.”

Dale Gillham, Wealth Within (Hold): “Given the recent economic figures released it seems that our economy is largely flat and adding another rate rise onto an already stressed economy does not seem warranted.”

Craig Emerson, Emerson Economics (Hold): “The RBA board minutes for the October meeting said there is no price wage spiral. If the CPI data due out on 25 October are within expectations the RBA will pause again. If not, it will increase the cash rate.”

Aarti Singh, University of Sydney (Hold): “Although there was an increase in quarterly inflation driven by higher fuel prices and rent, the annual inflation rate actually decreased to 5.4% from 6.0% in June.”

Tomasz Wozniak, University of Melbourne (Hold): “The 68% forecasting interval from my predictive system containing over two hundred models of weekly and monthly data spans the cash rate values from 4.09 to 4.25 per cent. Therefore, it includes both the HOLD and RAISE decisions. Despite the latest reading of quarterly inflation, and given the latest communication from the RBA, my choice is to indicate HOLD