Experts expect a cash rate jump in November

The majority of experts (69%) believe that the Reserve Bank of Australia (RBA) will raise cash rate on Melbourne Cup Day (tomorrow), according to the Finder’s RBA Cash Rate Survey.

All of the experts who predict a hike said they were anticipating a 25% basis point rise – bringing it to 4.35%.

Separately, GSFM investment strategist Stephen Miller, warned in September that an annual increase of 5.2% in the annual trimmed-mean inflation rate made a policy rate rise from the RBA in November “a near certain”.

He stressed that the October RBA Board meeting minutes revealed that the board has “a low tolerance for a slower return of inflation to target than currently expected”.

“Given that the RBA forecast was around 4.8%, it would be extremely difficult to reconcile that “low tolerance” with the absence of any policy rate hike,” Miller said.

At the same time, four in five panellists expected rental prices to continue to rise next year and that almost half of Australians (49%) would no longer aspire to own a home.

Graham Cooke, Finder’s head of consumer research, stressed that one of the reasons why the majority of experts believed in another cash rate hike was the fact that the inflation was falling but “not as quick as many had hoped”.

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

Also, according to Finder’s Consumer Sentiment Tracker, 42% of renters struggled in October to pay their rent, up from 29% compared to October, 2021.

According to Cooke, rent hikes will continue to force tenants to face difficult decisions as they had a limited ability to absorb the burden from rising costs.

“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.

Further to that, Australians seem to have abandoned their aspirations to own their own home, with a half of experts not believing that the Government’s proposed “Help to Buy” scheme, which allows to buy a home in a share equity plan with the government with as little as a 2% deposit, was 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 also shows almost half of non-homeowners (49%) – equivalent to 4.1 million people – no longer aspire to own a house and  found that 31% did not think they would ever be able to afford to buy a house, while 18% would rather rent.