CBA, ANZ change cash rate call to hike after CPI figures

The annual Consumer Price Index has clocked in at 5.4 per cent for the September quarter, fuelling the possibility of another rate hike as soon as Tuesday 7 November.

As a result, two of the big four bank economic teams – CBA and ANZ – have today said they now expect the RBA will increase the cash rate by 0.25 percentage points at its next meeting.

These revisions come on the back of today’s higher than expected inflation figures and a speech last night from Governor Bullock who said: “the Board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation”.

Now, three of Australia’s major banks expect the RBA to increase the cash rate in November, with NAB already forecasting a hike.

Westpac has not made an update to its cash rate forecast following this morning’s CPI figures.

Big four banks’ current cash rate forecasts for November:

What would a 13^th rate hike mean for borrowers?

For the average borrower with a $500,000 debt at the start of the hikes, another 0.25 percentage point increase would see their monthly repayments rise by $76.

Across all 13 hikes this would be a total increase of $1,210 to their monthly mortgage repayments – a 52 per cent increase.

Potential impact of a 0.25%-point hike in November on monthly mortgage repayments

Source: RateCity.com.au. Based on an owner-occupier paying principal and interest with 25 years remaining. Starting rate is the RBA avg. existing owner-occupier variable rate of 2.86% in April and assumes banks pass the hikes on in full.

What’s causing inflation the most grief?

Some of the biggest rises this quarter were unsurprisingly recorded in automotive fuel, rents and electricity. This is despite relief from energy bill rebates now in place across the country and a significant increase to Commonwealth Rent Assistance late in the quarter (20 September).

The ABS’ monthly CPI indicator for September also shows cause for concern. Annual inflation in the monthly data series rose for the second consecutive month to 5.6 per cent. Previously it was 4.9 per cent in July and 5.2 per cent in August.

ABS Consumer Price Index, Australia - annual movement

Source: ABS Consumer Price Index, Australia. Quarterly CPI and Monthly CPI.

RateCity.com.au research director, Sally Tindall, said: “Borrowers need to start getting their head around what a 13^th rate hike would look like in their budget because, at this point, the data is starting to point in this direction.”

“Governor Bullock has re-confirmed the Board is prepared to hike the cash rate if required. The big question is whether today’s lacklustre inflation figures are enough to throw the central bank’s forecasts off course,” she said.

“Australia has made significant progress in the war against inflation, but there’s now been a number of bumps in the road. It’s not surprising to see both CBA and ANZ change their November cash rate prediction to a rate hike on the back of this troubling data.

“A rate hike in November would mean an extra $76 a month towards the mortgage repayment. While not much in isolation, when you add this increase up across what would be 13 hikes, you’re talking about an extra $1,210 a month. For some families, that extra burden could be too hard to carry.

“A rate hike in November is by no means a done deal, but borrowers should start preparing nevertheless.

“Call up your bank today and ask them for a rate cut. The banks are still in the mood to negotiate, especially if they think you’re a flight risk.

“You might find you can offset the cost of a rate hike, or more, before the RBA makes its next move,” she said.

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